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Ever since iOS 5 was made available to the public around 1 PM ET or so, we've been attempting to update in vain.
The download goes through, but an error message keeps popping up when people try to install iOS 5. It says the update can't be completed and that the iPhone/iPad can't be restored.
Not only has no one in our office been able to complete the upgrade, but we're hearing from friends around the city and country that they're having similar trouble.
The famous iOS developer/jailbreaker Saurik tweeted that the "internal errors" are because Apple's servers are swamped. You may have to wait a few hours before trying to install again.
Feel free to vent any frustrations you might be having in the comments!
In the meantime, click here for a full tour of iOS 5 so you can see what you're missing >
UPDATE: The problem is definitely on Apple's end. It's servers are having problems verifying the update for everyone, even after they complete the iOS 5 download.
The answer is to wait a few hours, then try plugging your iPhone in again and updating. It should work. If it doesn't, keep trying.
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Markets around the world are higher, but an early rally is starting to fade.
Original post: The big event of the morning: The German government votes on expanding the EFSF, the big bailout fund that will be crucial for rescuing Greece.
It's expected to pass easily, though the vote is controversial. The big question is whether or not the vote can be passed with Merkel's coalition alone.
Merkel's government has pushed hard for this.
It's set to begin in a matter of minutes.
German speakers can watch the action LIVE here.
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The U.S. born radical Islamic al-Qaeda preacher Anwar al-Awlaki was killed Friday in Yemen.
CBS News confirmed with senior security correspondent David Martin that al-Awlaki was killed Friday morning in a U.S. drone strike.
Al-Awlaki had preached in San Diego and Virginia to several of the 9/11 terrorists, and has been linked to the Christmas 2009 bombing attempt on a U.S. airliner over Detroit.
Local tribal leaders said the attack came as the cleric was traveling in a two-car convoy that was attacked by pilot-less drones seen over the area in previous days.
A statement from Yemen's foreign press office said al-Awlaki "was targeted and killed about 5 miles from the town of Khasef in the Province of Jawf, 80 miles east of the Capital Sana'a."
This is not the first time news of al-Awlaki's death has been announced, so Friday's report was received with caution.
Al-Awlaki is the most prominent al-Qaeda member to be killed since Osama bin Laden's death during the May 2 raid on his Abbottabad compound.
The radical preacher was born in New Mexico and his greatest threat lay not in his operational skills but his fluent English and Internet savvy that helped him reach Muslims that may not speak Arabic.
Al-Awlaki was a master at crafting eloquent speeches calling for jihad against Americans.
Check out Anwar al-Awlaki speaking in this video below:
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Tyler Durden is a reference to the lead character in Fight Club. It's the pseudonym for Zero Hedge's key author(s) used to hide their identities. The most scathing report describing in exquisite detail the coming financial apocalypse in Europe comes not from some fringe blogger or soundbite striving politician, but from perpetual bulge bracket wannabe, Jefferies and specifically its chief market strategist David Zervos.
"The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe WITHOUT an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly - wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs - one for each country. That is going to require a US style socialization of each banking system - with many WAMUs, Wachovias, AIGs and IndyMacs along the way.
"The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks - even though it is probably a more cost effective solution for both the German banks and taxpayers... Expect a massive policy response in Europe and a move towards financial market nationlaization that will make the US experience look like a walk in the park. "
Must read for anyone who wants a glimpse of the endgame. Oh, good luck China. You'll need it.
Full Report:
In most ways the excess borrowing by, and lending to, European sovereign nations was no different than it was to US sub prime households. In both cases loans were made to folks that never had the means to pay them back. And these loans were made in the first place because regulatory arbitrage allowed stealth leverage of the lending on the balance sheets of financial institutions for many years. This levered lending generated short term spikes in both bank profits and most importantly executive compensation - however, the days of excess spread collection and big commercial bank bonuses are now long gone. We are only left with the long term social costs associated with this malevolent behavior. While there are obvious similarities in the two debtors, there is one VERY important difference - that is concentration. What do I mean by that? Well specifically, there are only a handful of insolvent sovereign European borrowers, while there are millions of bankrupt subprime households. This has been THE key factor in understanding how the differing policy responses to the two debt crisis have evolved.
In the case of US mortgage borrowers, there was no easy way to construct a government bailout for millions of individual households - there was too much dispersion and heterogeneity. Instead the defaults ran quickly through the system in 2008 - forcing insolvency, deleveraging and eventually a systemic shutdown of the financial system. As the regulators FINALLY woke up to the gravity of the situation in October, they reacted with a wholesale socialization of the commercial banking system - TLGP wrapped bank debt and TARP injected equity capital. From then on it has been a long hard road to recovery, and the scars from this excessive lending are still firmly entrenched in both household and banking sector balance sheets. Even three years later, we are trying to construct some form of household debt service burden relief (ie refi.gov) in order to find a way to put the economy on a sustainable track to recovery. And of course Dodd-Frank and the FHFA are trying to make sure the money center commercial banks both pay for their past sins and are never allowed to sin this way again! More on that below, but first let's contrast this with the European debt crisis evolution.
In Europe, the subprime borrowers were sovereign nations. As the markets came to grips with this reality, countries were continuously shut out from the private sector capital markets. The regulators and politicians of course never fully understood the gravity of the situation and continuously fought market repricing through liquidity adds and then piecemeal bailouts. In many ways the US regulators dragged their feet as well, but they were forced into "getting it" when the uncontrolled default ripped the banks apart. Thus far the Europeans have been able to stave off default because there were only 3 borrowers to prop up - Portugal, Ireland and Greece. The Europeans were able to do something the Americans were not - that is "buy time" for their banking system. And why could they do this - because of the concentrated nature of the lending. In Europe, there were only 3 large subprime borrowers (at least so far), so it was easy to front them their unsustainable payments - for a while. But time is running out. Of couse, the lenders (ie the banks) have always been dead men walking!
At the moment, the European policy makers – after much market prodding - have finally come to grips with the gravity of their situation. And having seen the US bailout movie, they know all too well what happens when a default of this caliber rips through the financial system. The reason the EFSF was created in the first place was so that there could be some form of a European TARP when the piper finally had to be paid and the defaults were let loose. Certainly many had hoped the EFSF could be set up as a US style TARPing mechanism (like our friend Chrissy Lagarde suggests). The problem of course is that there are 17 Nancy Pelosis and 17 Hank Paulsons in the negotiation process. And while the Germans are likely to approve an expanded TARP like structure on 29-Sep, it increasingly looks like it may be too little too late. The departure of Stark, the German court ruling on future bailouts/Eurobonds, the statements by the German economy minister and the latest German political polls all suggest that Germany is NOT interested a full scale TARPing and TLPGing process across Europe. They somehow think they will be better off with each country going at it alone.
The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe WITHOUT an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly - wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs - one for each country. That is going to require a US style socialization of each banking system - with many WAMUs, Wachovias, AIGs and IndyMacs along the way. The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks - even though it is probably a more cost effective solution for both the German banks and taxpayers.
Where the losses WILL occur is at the ECB, where the Germans are on the hook for the largest percentage of the damage. And these will not just be SMP losses and portfolio losses. It will also be repo losses associated with failed NON-GERMAN banks. Of course in the PIG nations, the ability to create a TARP is a non-starter - they cannot raise any euro funding. The most likely scenario for these countries is full bank nationalization followed by exit and currency reintroduction. Bring on the Drachma TARP!! The losses to the remaining union members from repo and sovereign debt write downs at the ECB will be massive (this is likely the primary reason why Stark left). It will require significant increases in public sector debt and tax collection for remaining members. And for the Germans this will probably be a more costly path. Nonetheless, politics are the driver not economics. There is a reason why German CDS is 90bps and USA CDS is 50bps – Bunds are not a safe haven in this world – and there is no place in Europe that will be immune from this dislocation. Expect a massive policy response in Europe and a move towards financial market nationlaization that will make the US experience look like a walk in the park. Picking winners and losers will be VERY HARD but let’s look at a few weak spots –SocGen 12b in market cap (-70% this year) with assets of 1.13 trillion BNP 31b in market cap (-55% this year) with assets of 2 trillion Unicredito 13b in market cap (-70% this year) with assets of 1 trillion Intesa 14b in market cap (-70% this year) with assets of 700b Compare this with the USA where we have - JPM 125b in market cap with assets of 2.1 trillion BAC 70b in market cap with assets of 2.2 trillion
Importantly, France GDP is only 2 trillion and in bank balance sheets are some 400% of that number. The banks are dead men walking with massive leverage to both home country income as well as assets. The governments are about to take charge and Europe as a whole is about to embark on a sloppy financial market socialization process that has been held back for nearly 2 years by 3 bailouts. The weak links will not be able to raise enough Euros/wipe out enough private sector equity to get this done, so there will be EMU members that need to exit and use a reintroduced currency for this process. We put a Greek drachma on the front cover of our Global Fixed Income Monthly 20 months ago for a reason.
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Megan McArdle is a Business and Economics Editor for The Atlantic I see that I rather glossed over the housing portion of the American Jobs Act last night, so it's worth considering the matter now. Obama wants to help homeowners refinance their mortgages at today's low mortgage rates. It's worth thinking through the effects of this, because it's yet another variation on a proposal that has been bandied about for a very long time.
The details are rather thin but as best I can tell, the government is supposed to "help" refinance a bunch of mortgages at current rates--somewhere between 4-4.5% on a 30-year. There will be no principal reductions, and it's not clear what percentage of the mortgage market this applies to, who pays the transaction costs, and so forth.
What are the economic effects of this?
You get an immediate burst of economic activity as people process mortgage claims. Does this create jobs, or more work for existing processors? I tend to assume that they must be swamped with existing refis, so will probably have to hire more people.
It also puts more money into consumer pockets. A working paper from the Congressional Budget Office estimates that about 2.9 million people would take advantage of a program like this. This is expected to reduce defaults by about 110,000, while saving consumers about $7.4 billion in the first year of the program. Some of that is recurring annual revenue--however, the CBO expects that number to decline in real value as the loans are paid down or the houses sold.
Call it $8 billion in stimulus. However, against that, you have to set the costs.
What are those? The net cost to the GSEs is expected to be about $600 million: they lose $4.5 billion in the Fair Market Value of their mortgage bonds, but that is offset with a savings of about $3.9 billion on the loan guarantees they don't have to make good, because lower the payments staved off 110,000 defaults.
However, there's also the private banking sector. According to the CBO, they lose $13-$15 billion in the fair market value of their portfolios.
The general response has been to dismiss this loss; the prepayments are perfectly legal and the banksters are vile, so to hell with 'em. And hey, couldn't happen to a nicer bunch of folks.
Felix Salmon argues that the CBO in fact is overestimating costs, and understimating the benefits, because it's only looking at the effects next year. From the point of view of the mortgage market as a whole, perhaps this is right (though given the historically unprecedented situation in the housing market, I expect they simply found it too uncertain to forecast home sales, foreclosures, and so forth). But from the point of view of stimulus it's exactly wrong. What matters most is what happens immediately.
As Tyler Cowen pointed out the other day, the Keynesians--especially those in the press--are paying way too much attention to flows, and almost none at all to stocks. But stocks matter too:
Just as there is a spending multiplier, there is also a multiplier from changes in wealth. For instance declines in perceived wealth will cause people to spend less. The Keynesian AD gains from a broken window have to stem from the difference between the spending multiplier and the wealth multiplier. Under the permanent income hypothesis, there's not a lot of daylight here. Furthermore the perceived wealth decline, even if it doesn't lead to immediate one-to-one reductions in spending, can persist over several periods. Granted, PIH is not exactly correct, but still the net impact of stimulus on current employment and income won't be that large because of the negative wealth effects. Fiscal policy remains a weak pill. The declines in housing prices in recent years really have taken their toll on AD so the wealth multiplier is not to be ignored. The notion that a stable and sustainable restoration of AD actually requires some increases in perceived wealth is one of the most underrated ideas among today's Keynesians.
We're getting about $8 billion in new spending stimulus over the first year after we enact the refinance program. But to get that stimulus, we're decreasing wealth by $13-$15 billion. The spending multiplier needs to be more than half again as big as the wealth multiplier for this to provide net stimulus.
It's possible that this is so. After all, one of the explanations for the recession is that money is getting stuck in the banks--it repairs their balance sheets, but it doesn't get put back into the productive economy. In the long term, this means we make a more robust recovery, but in the short term, people are suffering. If you think that money is getting stuck inside investment funds, then handing those people a large immediate loss in order to give other, poorer people a smaller immediate gain may on net produce more economic growth.
But the delta between spending and stimulus needn't be that big. Luxury goods, presumably purchased by people like the wives of hedge fund managers, have actually been doing well during the recession. This may be morally odious, but does not suggest that you can take money out of their hands without any impact on the real economy.
Heck, the delta needn't even be positive. We know from behavioral economics that people respond more strongly to losses than to gains. It's possible that the spending contraction from losing $15 billion would be stronger than the spending boost from $8 billion saved on mortgage payments. The people who take a bath on their bonds might cut their spending faster than people who get a break on their mortgage increase it.
Or maybe not--the CBO thinks that it will provide a sizeable stimulus relative to the amount of federal spending, though a relatively small one relative to GDP.
Overall, the program probably won't hurt much--the bondholders probably disagree, but in the end I have to agree with Felix that they knew prepayment was a risk when they bought the bonds. However, it probably also won't help much. The biggest bang may be whatever controversy it stirs up on Capital Hill.
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