Via Michael Ledeen: an Iranian Twitter message for the non-meddling set: “The Iranian ppl want 2 B part of the world – how hard is that 2 understand?”
Bill Kristol spots the chink in the Democrats’ armor on cap-and-trade: “I think Nancy Pelosi has made a huge mistake by defining everything in terms of jobs, jobs, jobs, jobs. And Republicans are going to say for the next year and a half, ‘Let’s have that debate. Is unemployment lower than when President Obama became president? Is unemployment going up as slowly as President Obama said it would when he lobbied for a stimulus and today when he lobbies for energy?’” Kristol and Bob Herbert are in agreement!
Obama’s approval/disapproval hits a new low in Gallup.
In Rasmussen: “Forty percent (40%) of U.S. voters now say President Obama has not been aggressive enough in supporting the reformers in Iran protesting the results of the presidential election. That’s a five-point increase from a week ago.”
Not good: “Latin America analysts said the Honduran coup will complicate President Obama’s efforts to re-engage a region where anti-Americanism has flourished in some areas. These experts said they expect Mr. Chavez , in particular, to seize on the Honduran crisis to try to depict Central Americas under an ongoing attack by capitalist and Western forces. As a result, some say, Mr. Obama will need to call for the reinstatement of Mr. Zelaya, despite U.S. concerns that he’s seeking to mirror Mr. Chavez’s campaign to secure limitless rule.” So now we’re “meddling” to re-instate Chavez’s pal who decided to emulate his patron by staying on beyond his term?
Mary Anastasia O’Grady has her doubts: “Yesterday the Central American country was being pressured to restore the authoritarian Mr. Zelaya by the likes of Fidel Castro, Daniel Ortega, Hillary Clinton and, of course, Hugo himself. The Organization of American States, having ignored Mr. Zelaya’s abuses, also wants him back in power. It will be a miracle if Honduran patriots can hold their ground.”
If Mitt Romney keeps sounding like a presidential candidate people will think he’s running for something: “And I think the party does have to stand up and be able to say, ‘Listen, Mr. Axelrod, you’re wrong when you say we don’t have ideas.’ We have a healthcare plan. You, you look at Wyden-Bennett, that’s a healthcare plan that a number of Republicans think is a very good healthcare plan, one that we support. . . We believe that, with regards to energy, that putting a massive tax on the American public and on industry is not going to create jobs, it’s going to hurt jobs.”
And Tim Pawlenty is also out on the Sunday circuit: “Well, the president said not long ago in an interview quote-unquote, ‘we are out of money.’ With all due respect, Mr. President, if we’re out of money, quit spending it. . .This is a nation that has got a debt load and a deficit load that is unsustainable. We’re going to have, in my view, the federal government debt crisis equivalent of the mortgage crisis within 20 years. And notwithstanding the rhetoric, the Obama administration does not appear serious to address this out of control spending.”
Democratic Sen. Mark Warner says “no” to the Fed as the risk czar. I suspect he’ll have a lot of company.
Second thoughts already? “President Barack Obama said House legislation aimed at curbing greenhouse gas emissions represents ‘an extraordinary first step,’ but cast doubt Sunday on the bill’s call for tariffs on goods from countries that don’t match U.S. efforts to combat global warming.” Maybe a trade war isn’t the way to go.
And yet, the market approves of the plan. The Dow is now within about 500 points of where it was on inauguration day. Is this a great administration, or what?
New York Mayor Michael Bloomberg, speaking on “Meet the Press” program Sunday: “I think Tim Geithner is exactly the guy that I would want there,” he said.
Actually, the investment firm is Obama, Geithner, Dodd, Frank, & Pelosi. Obama is clearly a partner in this firm. And the track record of this firm is only the destruction of investments, no growth whatsoever.
The only way this will be successful is if the government backs off the compensation rules. But I can’t imagine – especially after Obama’s stance this weekend and Frank’s tirade against Liddy – that the administration and Congress will agree to it. They need a scapegoat, some object of derision to keep the public angry. An angry public enables their socialist goals.
“And yet, the market approves of the plan. The Dow is now within about 500 points of where it was on inauguration day. Is this a great administration, or what?”
Not according to MarketWatch, which ascribes the bear rally to the actions of the Fed. The same article sounds a cautionary note regarding appearances this week by Geithner, which “could still trip up against some hurdles.”
3
Really? Here’s the typical MarketWatch story:
“BOSTON (MarketWatch) — The U.S. financial sector was set to open sharply higher on Monday on expectations that Treasury Secretary Timothy Geithner will unveil a long-awaited government plan to rid banks’ balance sheets of troubled assets to get credit flowing again. …”
Pretty specific, eh?
Leaving aside whether you can trust the populist scorpion, this is a great deal. Maybe foreign money will buy, since ACORN can’t give a bus tour of Arab homes.
As I understand the program, the psychodrama played out something like this:
Banks: This mark-to-market thing is killing us.
Geithner: Can’t fix that; it would look like smoke and mirrors.
B: Why don’t you create some buyers and get them to pay realistic prices for a few bonds. That would solve the m2m problem for us.
G: Can’t get them to admit they’re overpaying vs. current market price; it would look like smoke and mirrors.
B: Just subsidize the purchase: let ‘em take recourse-free loans guaranteed by the FDIC. The interest rates will be insanely low because of the guaranty, and the buyers won’t be afraid of the leverage because the loans will be non-recourse. They’ll happily pay more than the current market. That’ll raise the market value of what we own, which is all we need.
G: Oh, you mean HIDE the smoke and mirrors!! Done!
#5,”B: Just subsidize the purchase: let ‘em take recourse-free loans guaranteed by the FDIC. The interest rates will be insanely low because of the guaranty, and the buyers won’t be afraid of the leverage because the loans will be non-recourse. They’ll happily pay more than the current market. That’ll raise the market value of what we own, which is all we need.”
And how mant printing press $s would it take to accomplish this subsidy?
Don’t take your eye off the ball here or you won’t understand why anyone will do this.
Here’s how this is going to work. Say you’re a huge international bank – call it say, Siteebank – and you not only have billions of dollars in bad loans on your books but you’re also good buddies with TurboTax Tim and D.C. insiders. You yourself put up the magical 5% to join the partnership with government and then purposely overpay for your own loans. Presto! The bad loans are now the responsibility of the taxpayer and you’ve got cold hard cash from the Treasury. And the greatest part is that if things turn out better than expected, you will get all the profits from your measly investment while the taxpayer is on the hook for all the loses. It’s just confusing enough that most voters probably won’t get hopping mad that Timmy is just handing out cash to his confreres.
RCAR -
None. The government is an equal partner in the deal. If the private investors make money, the government makes money.
This whole mess arises from the market undervaluing the banks’ paper because the ratings agencies are broken. The PPIP program enables investors (and the government) to buy these assets at a price that is higher than the current market value but is well below the probable pay-out on the assets themselves. This will make the government money to the extent the assets actually transfer. MY suspicion, though, is that a relatively few transaction will take place because the banks would rather hold these assets (at the newly established “market” value) than sell them at those prices, because the new prices are still less than the assets are worth to the bank on a discounted present value basis.
#1, Bob: “the market approves”
“What I am looking for is not the day-to-day gyrations of the stock market…”
(Barack H. Obama)
we’re up 277 points folks. halfway to my predicted climb
http://www.youtube.com/watch?v=F6vkk8Orsrc
get yo OWN checkstub!!
#8,”and the government) to BUY these assets at a price that is higher than the current market value but is well below the probable pay-out”
And where is the money coming from to guarantee these assets when they tank? The “probable buy out” is the fly in the ointment? How do the counter-party payouts on the CDOs fit into your plan?
RCAR -
Why do you believe the assets will tank? Why do you believe the private investors who eventually step up to buy them will know less about their value than you do?
Since my assumption is that not much will actually be bought, I don’t really care if they do tank. But I have no reason to believe that the pros will overpay vs. realizable value. And neither do you except your hatred of them. (Yes, they make mistakes – big ones- but are you really better able than they to do their jobs?
Lester: Let’s see where we are at the end of the week, when no hedge fund actually agrees to participate in Timmy’s suicide pact.
Question: While I tend to agree with the more pessimistic scenarios, don’t you think that the market shooting up almost 300 points (as I write) is indicative that there is some serious money betting that there will be private takers on this deal?
#12,”
“Since my assumption is that not much will actually be bought”
I agree, but I’m having a hard time following you. The pros won’t overpay;they just won’t buy them at all when they can buy commodities,other securites that have verifiable value at fire sale prices,and don’t forget,great deals on REAL real estate.
13: it’s certainly not going to go back to 14,000 in a straight line. if at all ever.
from my personal perspective, a plan for the toxic assets is all I have been waiting for since like 6 months ago. not green home heaters or universal healthcare and everything under the sun else we’ve gotten instead
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132×8283272
nationalization mob livid. GOOD sign
RCAR -
I should have said “much won’t be sold.” I think investors will line up to buy these assets at very lucrative prices and that the deals that get done will be profitable for buyers and Uncle Sam alike. What I’m saying is that the banks will use this as a price discovery mechanism that allows them to mark UP their assets, which, in terms of regulatory capital is as good (or almost as good – I don’t know all the rules) as getting the cash and losing the upside of holding the assets. So I think most banks will hold onto their “toxic assets” precisely because this program will, to some extent, detoxify them by establishing a new market value for them.
That’s why I think the suggestion that banks will buy their own assets is incorrect. The banks already own their own assets and they can borrow from the Fed at zero and so won’t be looking to this program for financing.
I should add that I am not optimistic about the long-term consequences of this scheme, because I believe it is still largely about shoring up capital, not providing funds to lend. Funds to lend come when the NEW RMBS and CDOs are issued and our trading partners use our petrodollars and sinodollars to buy them despite the flaws in our ratings agencies. Note that Treasuries are higher today, which means both that the market does not see this as a money-printing scheme AND that the market doesn’t see it as making private sector paper much more attractive.
#18,”— because I believe it is still largely about shoring up capital, not providing funds to lend.
I’m saying this is a worldwide insolvancy problem;you’re saying it’s a balance sheet Capital problem. That’s pretty much the same thing in this case.
we appear to be going up a bit more here
Has the plan been announced yet? Or is this another case of buy the rumor, sell the news?
RCAR -
No. I’m saying this plan will fix the balance sheet problem, but the balance sheet problem is not THE problem. THE problem is that foreign investors rely on ratings, not bank capital. So this program will get banks permission to lend, but it won’t get them money to lend.
That money comes through the CDO market, which is where the trade deficit dollars used to reenter the country. Now those dollara are reentering through the Treasury (hence the low rates on bonds despite the non-stop printing of money). The Treasury must then turn around and act as invesment banker of last resort, which is what it’s doing.
Meantime, notice the brilliance with which the Left argues its point: I quote (in comment 3) an actual quote from an actual source. A clown from the Left (forgive the redundancy) responds in comment 4 with a hypothetical quote from the same source.
I took a break to read the NYT op-eds and discovered that Krugman interprets Geithner’s plan the same way I do (as a subsidized purchase of “bad” assets). But whereas Krugman hates the plan, I don’t. He thinks it won’t stabilize the banks; I think it will. But I think stabilizing the banks won’t get the money flowing.
I just wouldn’t want anyone to think I was making Krugman’s case here.
“That money comes through the CDO market, which is where the trade deficit dollars used to reenter the country.”
This is Geithner’s plan, to raise the Shadow Banking System from the grave. I don’t think it’s going to happen.
A boat load of money for a loaf of bread, that is where you’re heading.
“Let’s see where we are at the end of the week, when no hedge fund actually agrees to participate in Timmy’s suicide pact.”
TRANSLATION – Oh, PLEASE fail, Obama – PLEASE PLEASE PLEASE, fail Obama!
remember when the market was heading south, the financial gurus at Contemptuous ASSURED us it was Obama time…
things are looking up? Housing starts up (stimulus in action?) – unemployment ticked down?
OH NO! YOU JUST WAIT! FAIL FAIL FAIL!!!!!!!!!!!!!!!!!
That is why the market likes it right now – up over 350 points (along with some better housing news). From the funds perspective, what is not to like. I get to buy depreseed assets at rock bottom prices – if I don’t like the price I won’t buy. If I can force a terrible spread on the government at the buy it just increases the subsidy – and increases the costs to the taxpayer. And the taxpayer gets nothing in the end. He pays the subsidy and prays it unlocks the credit markets, and as has been argued here, what if it doesn’t do that? Another $500B to $1T of money down the drain.
I assume that the government will back off the AIG bonus stuff right away, because you would have to be suicidal to get involved at all if you were concerned that the government changing the rules, and trust me, this program will cost more due to their grandstanding. The government will pay a premium for their little hissyfit.
WAR – if you believe the stimulus has anything to do with housing start info, please. It is good news and I will take it, but it is a positive number because in several markets we have hit bottom and prices are pulling out buyers. All to the good – but not all due to anything the government has done. All they have done is draw out the pain by interfering.
“All to the good – but not all due to anything the government has done. All they have done is draw out the pain by interfering.”
If you guys were consistent- I might buy that pitch – but the right wing has decided that Obama succeeds or fails as goes the stock market – notice how J-Rub has been pretty quiet about THAt for the last few weeks – and we were told – by ALL the experts here, that O and company were the REASON – after 6 weeks – that the economy tanked.
You CAN’T have both ways.
RCAR -
All it would take to restore credit is a credible ratings system. If the sovereign wealth funds actually believed that a AAA-rated US corporate or CDO or MBS was really AAA, the money would be flowing like crazy. Right now, they don’t believe it, so they buy Treasuries and let Uncle Sam provide money to lend via TALF. Eventually, the taxpayer runs out of appetite for risk, though.
#31,
Let’s not forget realistic fear of inflation slows down lending;they don’t have the crystal ball to figure out what interest to charge to cover inflation. And who’s going to borrow today at 10% to cover minimal inflation expectations.
One of these days let’s talk about systemic insolvancy.
RCAR -
I don’t think our trading partners really care much about non-weimar inflation. They may say they do, but they really want to keep their domestic economies humming by selling us stuff. The oil is already indexed, and the Chinese just want to stay employed. An inflation haricut on our paper doesn’t scare them or they would already be rebelling at the rates we’re paying for 30-year paper.
Kudos to Lester-
He called (back in February) that the market would rally 500 points when Geithner announced his plan.
He reiterated that call again, when the news came out the Geithner was finally announcing his plan.
And today, it closed up just under 500 points.
Nice prediction Lester!
Yes, gotta give a shout-out to Lester on this one. Nice job, man. Good call!
I had a few friends bail on the market when it was under 7,000. I’m partially tempted to go rub their noses in it… which would virtually guarantee that we’d crater to 5,000. So I think I’ll keep my mouth shut!
thanks guys and sorry to anyone who felt let down by the 2.5 points but we still have tomorowws open! I said it didn’t have to happen all in one day.
I’m not a chartologist or economic forecaster, I just know that for myself personally this was the clarity I wanted and I guessed others felt the same way.
now there are new problems. It’s not smooth sailing. One benefit we have is that post iraq war people are really primed to speak their mind on an issue to the press and executive office and anyone else and it’s making for a messy but productive recovery thusfar. hopefully it will be able to stay this way without derailing.
warpublican- there are people rooting against Obama but the people who bought today are not all liberals! My mother’s broker is a big shot who appears on CNBC from time to time and has billions of assetts under managment is a born again christian and right wing “nut”. she is not goin to sit on the sidelines because it’s obama up there, it just doesn’t work that way. at the same time, the obama admin has to be carefu not to alienate the big money guys because they are obviously important to the economy.
It is a mistake for pundits to use the stock market as a report card for Obama,whether for or against.