Melt-Up Blogging: The Citi Rescue

The NY Times describes the Citi bailout.

Mark Thoma provides the definitive roundup.  General reaction is negative, so let me stake out a contrary position.  Negative first:

James Kwak says the bailout is "Weak, Arbitrary, Incomprehensible." I think he has it right:

Citigroup Bailout: Weak, Arbitrary, Incomprehensible: According to the Wall Street Journal, the deal is done. Here are the terms. In short: (a) Citi gets another $27 billion on the same terms as the first $25 billion, except that the interest rate is now 8% instead of 5%, and there is a cap on dividends of $0.01 per share per quarter; and (b) the government (Treasury, FDIC, Fed) agrees to absorb 90% of losses above $29 billion on a $306 billion slice of Citi’s assets, made up of residential and commercial mortgage-backed securities. (If triggered, some of that guarantee will be provided as a loan from the Fed.) There is also a warrant to buy up to $2.7 billion worth of common stock (I presume) at a staggeringly silly price of $10.61 per share (Citi closed at $3.77 on Friday).

The government (should have) had two goals for this bailout. First, since everyone assumes Citi is too big to fail, the bailout had to be big enough that it would settle the matter once and for all. Second, it had to define a standard set of terms that other banks could rely on and, more importantly, the market could rely on being there for other banks. This plan fails on both counts.

As to the bailout being big enough to settle this once and for all - why?  Sufficient unto the day are the rescues thereof.  If (Heaven help us) the economy begins recovering late in 2009 Citi's problems may resolve themselves.  If not, the principle that we will still (and always!) have Citi to kick around has been firmly established and the Treasury ca re-dip then in Holy Water next year.

As to the notion that the rescue should provide a template for other rescues - again, why?  An ongoing counterpoint to these orchestrated rescues is the notion that some semblance of market discipline should be preserved.  If investors continue to wonder and worry about other firms, well, that is a good thing.   Or at least, so some at Treasury and the Fed would argue.  Personally I think one Lehman was one too many and we won't be seeing any more failures but I don't think the Federales can formally announce that - they must Keep Pretense Alive and let us imagine that somewhere out there is a firm not too big to fail.

Finally, I am liking the new approach that is being criticized as unfair to taxpayers.  With the AIG rescue current shareholders were taken out and shot. That example of market capitalism in action was meant to serve as an inspiration to the others but it has had the effect of creating its own equity investment freeze.  Except in the rare cases (the politically powerful confluence of Warren Buffet with Goldman and GE) it has been difficult for afflicted financial firms to lure in new investors.  By not punishing Citi management and disemboweling the bold Sheik who shook loose with some change (and hope) as Citi plunged last week, the government may make it possible for other management teams to assure prospective investors of management continuity and government sympathy.  Maybe.

So that's my table-pounding conclusion - this package may not be nearly as stupid as it looks. 

A PEDANTIC QUIBBLE: Boy, do I question this from Kwak:

...a cap on dividends is a nice touch but shouldn’t affect the value of equity any.

Hmm...  I have a real problem with applying the Miller-Modigliani arguments to a firm like Citi that is teetering on the brink of being something other than a going concern.  In the current environment, cash dividends paid by Citi increase the risk of Citi's debt and increase the option value of the common equity.  I would be surprised if those two effects did not more than offset the cash value of the dividend; if that is in fact the case, then paying dividends does increase shareholder value (as a transfer from bondholders and, in this case, the government).

FROM THE DEPARTMENT OF THE OBVIOUS:  Billions for banks but not one cent for tribute to Detroit?  Hands up if you think the automakers won't get their cash, which at $25 billion as a down payment seems like a pittance by Citi standards.

I don't see any hands... (Waddya mean, I need to try video-blogging?)

Comments

[vinman]

detroit sheds tens of thousands of jobs every year, so. . .what's another couple of years?

[Neo]

In a Panic brought on by a massive pile of debt, along comes even more debt. One should expect a repeat of the long “New Deal” that scholars have shown was extended by FDR’s programs and finally ended by WWII.

Should we all be now hoping for WWIII ?

[Neo]

Just looked at the INDU .. it was up 334 when "The One" took to the TV .. but only up 220 when he was done .. a 110 point loss on the effort.

[clarice]

I feel like the grandfather in "Moonstruck".I'm so confused. The more the govt pisses away money, the more the market likes it.

Is this some new something for nothing economics principle I missed.

[PeterUK]

"Is this some new something for nothing economics principle I missed."

No,it's the old principle,"Free Money"! If the markets showed disapproval the Government would stop,that would never do.

[kim]

They're pissing into the wind, and even though they keep redirecting the flow, the wind direction keeps changing. Time to resurrect my firefighter analogy for TCO.
======================

[nonetoday]

Isn't Rubin on the board of Citi and also one of Obama's economic advisors? Is that appropriate?

[bgates]

Meanwhile in Forbes, one of the young geniuses who used to guest post for Andrew Sullivan and has taken it upon himself to fix the Republican party writes, "President-Elect Barack Obama will enjoy his honeymoon for many months to come, and so far he deserves it". Why? His opposition to crony capitalism, of course.

[Jane]

Let them fail.

Sheesh we are never going to get out of this.

[PeterUK]

"President-Elect Barack Obama will enjoy his honeymoon for many months to come, and so far he deserves it".

So far he hasn't even carried the bride over the threshold.

[jwest]

You would think that with all the controversy over the Detroit bailout, one enterprising MSM reporter would try to get some actual facts.

http://gmfactsandfiction.com/archives/

Considering the media’s record with Iraq, Katrina, Plame and every other subject, I guess it would be asking too much.

[Rick Ballard]

"Sheesh we are never going to get out of this."

Dunno about that. The downside is that a morally, ethically and intellectually bankrupt corpse of a company is being propped up for a few years. The upside depends upon whether individual mortgages can be rescheduled quickly enough to halt the increase in the default rate and allow pension funds to capture enough of the income stream to maintain payouts.

I have no idea as to whether or not it will work, given that the fire appears to be burning as brightly as ever. President Elect Omumbles appears to back the solution - perhaps his blithering and blathering idiot supporters in the business press might begin to reslant their doom and gloom coverage? PE Omumbles appears to recognize that the problem is slightly more serious than Soros had anticipated. Perhaps he's really not as stupid as he sounds. I certainly wouldn't bet on it but the possibility does exist.

[centralcal]

Oh Darn. (not)

Hannity & Colmes

[Jor]

TM: You missed the story where "Whitehouse unaware of efforts to bail out Citi". SHEER INCOMPETENCE. Forbes called Paulson "the worst secretary of treasury in modern history".
Mission Accomplished.

[Thomas Collins]

See LUN for the view that this Treasury and Fed hocus pocus will simply prolong the slump. Any folks steeped in the Austrian School reading this blog? I would love to hear from an Austrian Schooler about whether he or she thinks that all this Fed and Treasury hocus pocus and Zero's Amphetamines For the Economy Package have a chance of combating our very own Credit Deflation Tsunami.

[LindaK]

After last week's bear run on Citi, the bailout was inevitable. But don't you feel like you're getting dispossessed daily by Paulson et al? So we panicked citizens are running to the last market we think is safe -- the T-bill zone. And with so much money chasing bills, the interest rates are now so miniscule, we're actually paying them to park our money with the USG. The current Bloomberg quote on the wi12/16/08 is .09. We are getting hosed and now you know where Paulson is getting the funding for these bailouts.

[Kevin B]

I am not a qualified Austrian Schooler, (nor do I play one on TV), but my guess is that the current "govenment spends it's way out of recession" policies will work exactly as well as they have before.

Which is annoying, since having worked and saved for the last 40 odd years, I now find my labour is no longer required by my company, and living off my savings and pension is going to be a lot more interesting.

[LindaK]

If my BP weren't 200/120 already, the fed is not only guranteeing the residential/commercial loan securitizations, but the "associated hedges". So we taxpayers are guaranteeing derivatives, like the CDOs. But they assure us that it is "ring fenced".

[PeterUK]

""the worst secretary of treasury in modern history".
Mission Accomplished."

Jork,that is most unfair,Obama hasn't even been sworn in yet,give him a chance.

[Thomas Collins]

You're probably just as qualified as any of the TV Talking Heads, Kevin B (whether they make believe they are experts in the Austrian School, Keynesian School, or whatever School). And what you say, unfortunately, seems to be a realistic assessment of what happens in the real world.

It looks as if the global financial system's Plutonium Card is over limit, and that paying it down will take awhile. Let's hope there is still enough cash (from relatives, unused credit lines, day jobs, or whatever) for our "office in the garage" entrepreneurs to continue working on their wild schemes (most of which will fail, but some of which will improve our lives more than the schemes of the current crop of clowns working in plush offices).

[narciso]

Both Hayek and Von Mises would scream at this disaster, I'm fairly confident, Heck
even Keynes would rise from his grave and say what the hell, do you think you're doing. Did you even read my books. Harold
Laski, might give a thumbs up though. He thought the New Deal was too moderate, Stalin was on to something.

[JM Hanes]

Can't we just kill 'em all and start from scratch? Everybody's an expert, and you'd be hard pressed to find two of them who aren't disagreeing about some ostensibly key piece of the putative solutions.

All I'm seeing is a humongous financial superstructure and a lot of folks saying if we just suspend a rule here and a little law of physics there, it can defy gravity indefinitely. We've got to keep Citigroup and Detroit in business because they're just so big they'll take out the bamboo scaffolding that holds it all together on the way down. You rubes do not want to see what that looks like, because it's your money we've been letting them play with, dontcha know.

Not to worry, your government can save the day, because, after all, thanks to you hardworking Americans out there, the U.S. economy is too big to fail too, isn't it? Unless we don't keep Citigroup and Detroit afloat, of course. Think about it. [And For God's sake, hide those corporate jets guys, because they kind of make us all look bad.] Your government has gotten too big to fail too, BTW, so we're going to have to raise your taxes.

This is all my fault, of course, because I don't even begin to understand the financial conversation going on here and made the mistake of thinking the folks who knew the language actually knew what they were doing too. Apparently, that makes me the stupid one. That's probably why I can't tell the difference between the coprporate leeches and the government leeches any more, and why "letting the market decide" has begun to sound like just another form of economic mumbo jumbo, like governement "investments" in health, education and welfare. The electorate seems increasingly inclined to vote themselves money from everybody else and the capitalists are shocked, just shocked, at this socialist assault on democracy.

[George W Bush]

Mission Accomplished.

Hey, Jork; how'd you like my exit strategery in Iraq? It's called victory, something your ilk fought us tooth and nail against achieving. Yet through the efforts of people much better than you it's in our grasp. But it's still only a battle on the war on terror; a war you're still determined to lose. When you sit down to eat your freshly butchered tofurkey on Thursday, try not to think too many wicked thoughts about the people that brought democracy to the people in Iraq, no matter how much you hate them.

[JM Hanes]

"So far he hasn't even carried the bride over the threshold."

You're my favorite, PUK!

[Patrick R. Sullivan]

Citi gets another $27 billion on the same terms as the first $25 billion, except that the interest rate is now 8% instead of 5%...

Which is right out of 'Lombard Street'; lend freely at a penalty rate. Judging by Obama's econ team named today--adding Christina Romer (a Great Depression historian) to Geithner and Summers--policy will continue in that vein.

No role for Jamie Galbraith-Dean Baker-Max Sawicky-types. Obama is at least smart enough to know what it's going to take to be re-elected in 2012, and it's not cow-towing to the Daily Kossacks.

[Kevin B]

Of course another thing that's going to make my retirement fun is energy rationing.

My government here in the UK signed an Act of Parliament that promised to cut carbon emissions by 80% by 2050, and every time they announce a new plan to 'stimulate' the economy, they always add the rider that "we musn't let our minor economic woes deflect us from our energy commitments".

My suspicion is that they have made such a godawful job of planning for our future energy needs that the promised cuts are forced rather than voluntary.

Still, I have lots of trees in my back garden, though cutting them up for logs is going to be tough and defending them from the patio and car port gardeners that live round here is going to be tougher.

[Rick Ballard]

"I would love to hear from an Austrian Schooler about whether he or she thinks that all this Fed and Treasury hocus pocus and Zero's Amphetamines For the Economy Package have a chance of combating our very own Credit Deflation Tsunami."

AFAICT the consumer strike will probably endure until the idiots promulgating the fundamentally incorrect Schiller-Case housing bromide announce their satisfaction with the "median" price of a house. The fact that changes in what constitutes a "household" have been rather radical and that "median family income" is the more appropriate measure seems irrelevant to them, as does the fact that the Schiller-Case index reference to "median" pricing might currently be just a tad out of whack due to financing being largely unavailable for the more expensive homes. Once there is a declaration that the wholly imaginary Schiller-Case "Goldilocks" level has been reached people may well stop holding their breaths - and stop stashing the money that they would otherwise be spending in mattresses.

A comparison to Japan's deflationary situation which does not account for the difference in population growth differences is as risible as a comparison to the American economy of the '30's when some 22% of the workforce were employed on farms and wholly at the mercy of deflationary pricing while only 10% were employed by the government and fully "protected" from its impact (rewarded, actually). Today, less than 1% of the workforce is on the farm and 20% are employed by some form of government. In the '30's, 32% of the workforce was employed in the "goods producing" sector while today only 16% are so employed, likewise, in the '30's only 36% of the workforce was engaged in the "service producing sector" while today some 61% is busily engaged in taking in the neighbors washing. This won't play out like either of the favorite scenarios.

I've read Mises and Hayek beyond the "for Dummies" level and I tend to strongly agree with their observations but I cannot say that application of their suggested remedies is going to be efficacious in all situations. I find myself rather indifferent to the Paulson/Bernanke "Weekend at Bernie's" plan for financial institutions which deserve to be buried at a crossroads. It's an alleviation of a symptom which may ameliorate the results of the "this will either kill you or cure you" solution that will finally result in the substitution of FICO scores for the character failures occasioned by so many believing that they are, in fact, philosopher-kings, able to "do what is right" through their own self-serving ratiocination.

So, the answer is "that depends". Please provide a proper billing address.

[PeterUK]

KevinB,
What a coincidence,I have a miserable, gibbering, vacuocephalic, excuse for a government like that as well.They so desire to ingratiate themselves to what they believe is the troop of alpha baboons in Brussels they would tax mother's milk.
Don't worry about your trees,the shed and the fence will go first.

[Thomas Collins]

Isn't every word we write here "pro bono JOMerico," Rick Ballard? :-))

I hope you are correct that the Austrian School model doesn't apply "in toto" (I guess this is my day for Latin) to this situation. Your prior numbers analysis including how you analyzed the Lehman CDS auction is hard for me to argue with. I just keep having this sneaking suspicion that until the disclosure rules catch up with the technology, the financial faucet is going to be continuing oscillating between a drip drip and a total shutoff (except for the Fed and Treasury, both of which seem to think they have enough "reserves" to guarantee anything in sight and out of sight).

[Rick Ballard]

C'mon guys - there is nothing in the world as regressive as Air Taxes. Governments are hell bent on sticking it to the peasants too stupid to stop applauding while their pockets are being picked clean. Give the fellas a little credit for screwing the folks that elected them so thoroughly.

[clarice]

In the good old days they'd at least have provided us with bread and circuses.

THAT they now leave as a do it yourself project.

[Thomas Collins]

Any self-described "progressive" who is really for the people would fight tooth and nail against Air Taxes (I love that phrase, Rick Ballard). Air Taxes will cause job cuts for the working class. Air Credits are even more pernicious. They will enrich fat cat market makers at the expense of the working class. If there ever is a true leftist revolution in the USA, the Al Gore types should be the first sent to the Reeducation Camps.

[fdcol63]

We're mortgaging the country's future with a shell game of bailouts.

And all the cards in this financial pyramid are crashing down on us now.

We'll have to pay the piper someday soon.

TANSTAAFL.

[Pofarmer]

O.K. What is the govt gonna do when it can no longer borrow the money for these bailouts? Print it? Like that always ends well. Can the Federal Govt do a California?

[PeterUK]

"In the good old days they'd at least have provided us with bread and circuses."

You are simply not rioting enough.What was the quote,
"There are only enough ships to send the corn or the sand".
"Are you mad? Send the sand".

[Thomas Collins]

The NFL playoffs, the Super Bowl, the college footbal bowls and the BCS College Football Championship Game are coming up, clarice. That will provide some bread and circus nutrition. And as far as we know, the NFL and NCAA aren't in line for a Fed/Treasury Handout (yet).

[TCO]

Borrowing the money is just soaking it to future taxpayers.

Let people who made bad bets deal with their losses. Most of these losses are not even at anything near a normal "bank". They came from speculative trades. What is happening is that the "bank" word is being thrown around so that people think that propping up traders is like stopping a bank run. But really what is happening is that FDIC is being looted. The normal commercial banks are fine. It is the investment banks that are screwed. And for some bizarre reason, we must think there is a problem if Goldman Sachs goes under. This is Paulson saving his buddies, people. That...and he's really not that bright to start with.

[TCO]

kim: your fire-fighter analogy is just fluffy wording, not based in economic rationale.

[KhWa]

Can't we just kill 'em all and start from scratch?

They did that with mean cylons. They're boxed, unplugged. Very relaxing being shut off and dying.

The game about Congress not giving away 100s of billions to make Obamas happy is ridiculous. He has already done his job and plans on relaxing, doing some crack and seeing shit. He's already done, except for some special history. His holiday?

[PeterUK]

Worry not Obama has filled the power vacuum. The economy is under the control of The One.

[Sara (Pal2Pal)]

Declare Jubilee and forgive all debt worldwide, corporate, government, or individual and let's start over. Everyone with zero liabilities. Better than donating our souls to the government in the form of taxes.

[Pofarmer]

So, we started the bailout so we wouldn't have to bail out the individual companies when credit dried up. Well, credit still dried up, the Stock market dropped, what, 4000 pts? GM and Ford are still in trouble and if it keeps up so will be McDonalds and many others.

Seems to me it would have made sense to just go the direct route in the first place, if this is what had to be done. None of this playing footsie with corrupt investment bankers.

[Pofarmer]

The U.S. $ index certainly didn't like the news today.

[TCO]

Where I am banned/unbanned:

b]Now banned at:[/b]

Apolyton: self imposed
Brad Delong
Climate Audit: self imposed
Double Salto
Extremeskins
Freefirezone
Greg Mankiw
Jen Sey
Patterico
Swiftboatveterans for truth
Triple Full
Wikipedia: 1 week
WWGym forums

[b]Not yet banned at:[/b]

Asimov's
Counterglow
Gymblog
Gymnastics Coaching
Justoneminute
Libertarian Republican
Live Breathe Love Gymnastics
Open Mind
Pogo.com
Volokh Conspiracy

[PeterUK]

TOC,
Thanks for that really riveting piece of information.

[Rick Ballard]

For those interested in actual numbers about which to babble, the Treasury has thoughtfully provided a page listing Transaction Reports. Through 11/17, the Treasury has purchased $283,561,409,000 worth of 8% preferred. Citi is in for $25 billion as of 11/17 plus yesterday's additional purchase.

This is going to be a five year "solution" so the 5 year Treasury rate seems the appropriate "cost" to place upon the transactions. That would be 2.2% as of this afternoon (with a 5 year auction scheduled tomorrow for confirmation). The Treasury has a 5.8% spread with which to cover losses due to bank failures. The net to Treasury on a 0 net loss basis is $16,446,561,722 less friction costs.

I have no idea about how to generate an expected loss percentage for the program and at this point I'm afraid that my response to any quant feeling like taking a stab at it would leave me breathless from laughter. It probably won't be 0 and it probably won't exceed 20%. If it went to 20% but the losses didn't occur until the end of the third year, the investment would still turn a profit.

[Rick Ballard]

Should be The net to Treasury on a 0 net loss basis is $16,446,561,722 annually, less friction costs.

[Jane]

TCO,

Why on earth would anyone here care?

[clarice]

Picky, Jane.
Rick, that's an interesting figure. Why do you suppose no one has mentioned this?

[clarice]

I do remember earlier when the first bailout discussions began it was noted that on a previous bailout--forget which--the govt made money.

[clarice]

And then if we're lucky they['ll be lost opportunity savings --Having spent all this money, the govt surely can't be serious about funding a new new deal.

[Patrick R. Sullivan]

TCO, Mankiw hasn't had a comments section for quite some time now. We're all banned, but if it makes you feel worse, he usually responds to my e-mails and puts up links to econ articles I recommend to him.

[Ann]

Jane, He is proud of it. He reminds me of someone I tried to help with their resume... that was six pages long.

Let's just hope he isn't a gym coach.

[clarice]

***there'll be***

[centralcal]

Let's just hope he isn't a gym coach

Or anywhere near young gymnasts.

[Pofarmer]

Having spent all this money, the govt surely can't be serious about funding a new new deal.

Yeah, right.

[Rick Ballard]

Clarice,

I see very little reference to actual numbers anywhere. Lots of babbling about $700 billion being used as if it were an 'investment' in something truly stupid - say a "Green jobs" program and zero assessment concerning the possibility that Treasury might turn a profit.

The 90/38 LTV/Gross income project is starting to fire up and I haven't seen one assessment yet that evaluates the possibility that will work either.

It's a shame that credentialed economists seem to be so ignorant regarding actual investment economics. They can posit Keynisian or Pigovian solutions until their readers' eyes cross but they can't acknowledge the fact that sales in areas where the Schiller-Case 'Goldilocks' line has been crossed are going through the roof.

You sure wouldn't want them shining your shoes unless it was safe to leave them outside for a few weeks.

[centralcal]

Clarice, earlier on the other thread, I posted a link to the pardons that were granted by Bush (the info released today).

Do you think there will be more from Bush, or was that it? Never heard of any of the 14. I read somewhere that Libby has not applied for one. Is that true?

[clarice]

I think there will be more. I think anything controversial will be granted on the last day. I haven't heard that Libby has sought one. I don't recall reading he applied for a commutation either though.
Slate ran a list of more prominent names it thought might seek or get pardons.

[clarice]

Come now Rick, they can't count when it comes to other people's money--they all seem to make out just fine for themselves though.

[centralcal]

Well, I am asking because I know of someone who is seeking a pardon. Someone who has already served his time and who is the subject of a book and a movie.

I was looking for his name on the list. Which, was basically a bunch of ordinary sounding minor criminals.

[Thomas Collins]

Isuppose the actions of the Federales make sense if one concludes that the key factor in the freeze up is uncertainty about toxic assets. If the assets looked at as a mass class are not toxic (although certain ones are), the Federales will end up both stabilizing the market and making some $$$. If the Federales are wrong, they are helping extend the pain (by not allowing firms to go into bankruptcy that should so go). More drama than yesterday's "24" special (maybe Jack Bauer should be enlisted to clean up the financial mess).

[clarice]

That's what they were,cc--probably served most of their time, had good evidence of rehabilitation and some hint of a sentence that exceeded the offense.

[Ann]

I adore Michael Ledeen and he has posted a story about Marines in FARAH PROVINCE, Afghanistan. If you are tired of bad news. please read it:

Hero of the Day [Michael Ledeen]

[centralcal]

Ann: I read that story this morning. Go Marines! The corporal was focused on his job and his aim. Great story. I wonder if he is a hunter in his civilian life?

[centralcal]

With Alan Colmes saying adios, adieu, sayonara to H & C, what do you all think they should do with that hour? I don't know if I can handle Hannity alone for an hour, but at least I won't have to put the show on mute for 3/4's of the time. grin.

[RichatUF]

clarice-

the first bailout discussions began it was noted that on a previous bailout--forget which--the govt made money

Resolution Trust Corporation.

[clarice]

Michael's eldest son just finished two tours of duty in Iraq with the marines and is returning to the area-this time to Afghanistan as an embed not with the Marines. His daughter has spent time with DoD in both Iraq and Afghanistan and his youngest son is a Marine reservist at Rice University.

Worth remembering if "chicken hawk" is still in vogue.

They are all great kids.

[Captain Hate]

TCO banned from extremeskins; I'd really like the details on that because I can't imagine his always congenial personality causing any rifts there.

[Rick Ballard]

"If the assets looked at as a mass class are not toxic (although certain ones are), the Federales will end up both stabilizing the market and making some $$$."

Thomas Collins,

The Feds have the totals pretty well pegged, IMO. The potential Stinky Stuff (ARM/ALT-A) totals $1,263,557,386,012 in loans against an original value of $1,526,825,454,937. Give the original value a 30% haircut and cut the loans to 90% of that and the loss is $301,657,349,402. Not chickenfeed but hardly fatal in a $14 trillion dollar economy.

The Feds have to get the pigs on Wall Street through the CDS maze in order to resolve a $300 billion problem. It's unfortunate that more of them can't be butchered and served up as snacks along the way but the "interconnected" business interferes with having proper luaus. Let the CDS monster loose and the printing presses will melt down trying to "solve" the problem.

Keeping the Zombiebanks ambulating is a polite fiction but it may serve the purpose of getting rid of the CDS monster for good. Nobody hs issued any MBS since July according to what I've read. In 56 months the CDS monster will be dead if they keep it up.

[Jane]

Did you read Judith Apter Klinghoffer's piece on the economy (LUN) where she blames OPEC not Fannie Mae and FM for the current economic woes.

Anyone agree, or disagree?

[Captain Hate]

With Alan Colmes saying adios, adieu, sayonara to H & C, what do you all think they should do with that hour? I don't know if I can handle Hannity alone for an hour, but at least I won't have to put the show on mute for 3/4's of the time. grin.

Somebody @ AoS had the perfect replacement for Colmes: John McCain

[Ann]

It seems to me that we have a whole generation of young, smart, strong, patriotic vets that will be coming home knowing full well how the democrats wanted the U.S. to lose for political reasons. They just might be our Nation’s best hope for the future.

[PD]

With Alan Colmes saying adios, adieu, sayonara to H & C, what do you all think they should do with that hour?

Replace him with Kirsten Powers.

[RichatUF]

Rick-

Great comments on the thread. Was it the Bloomberg 7.76 TRILLION article that pushed you over the edge?

[Rick Ballard]

Jane,

Not OPEC. They're thieves and liars but Goldman-Sachs and the pimps working the Oil Drum for them promoting "Peak Oil Today" are the scum responsible for the price spike.

The KSA was quite clear in 2005 that they were shutting down production at Ghawar for a year in order to do necessary rework and there was never even one spot shortage in the entire time that GS and its pimps were promoting their scam. Russia, Venezuela and Iran did their very best to promote the scam as well but Russia is not OPEC and Venezuela and Iran acted in support of their own ends as much as in support of Zero.

The oil spike belongs to Goldman-Sachs and it is they who deserve all the contempt for putting themselves before the interest of the country and the world. OPEC is a nest of thieves but Goldman-Sachs is a brothel full of whores.

[RichatUF]

Jane-

A short comment, followed with a more lengthy comment later-sort of. OPEC and gaming the oil price was a part but housing prices were breaking a year before the oil superspike. The day of reckoning was eventually going to come, oil just accelerated the process for both the auto makers and consumer spending. Add in the carpetbombing of active measures for the last year, and I'm a bit surprised that this sucker has melted down like Iceland.

[clarice]

PD, That's what I'd do.

[Rick Ballard]

Rich,

Never Bloomberg. They're as bad as AP or any of the other party organs. I was slightly peeved to see the excitement generated by Omumble's "promise" to generate or preserve 2.5 million jobs over two years. The fact that the sycophants "reporting" his pronouncement neglected to mention that the economy is projected by the BLS to generate 3 million jobs all by it little lonesome was unsurprising but stimulating.

[centralcal]

Me too, PD. Kirsten would (I hope) force Hannity to up his game. Okay, maybe not. He is only as bright as his 5 pieces of information on any given night, week, month. sigh.

[Ann]

CC, I don't know who should replace Alan, but I am tired of the screaming. I only watch when there is a quest like Rove or Steele. We have a lot in common.

Captain, LOL! My original thought was that Extremeskins had to be a dancewear/gym leotard site. Funny, to find out it is a Redskins football site. He probably lasted a day.
Forgive me, if I put any bad images in your head!!! :)

[Sara (Pal2Pal)]

Take the HOT AIR poll on who should replace Colmes.

[RichatUF]

Or I mostly agree with Rick. The thing about OPEC is that there are "price hawks" and "price doves". Iran and Venezuela need the price of oil high-up around $100/bbl for their corporatist models to be sustainable. KSA needs a moderate, stable price to encourage demand and to discourage alternatives (35-45$/bbl, others may disagree). The only one that matters though is KSA because they are the one with the surplus capacity to swing markets. Russia is still in the mode that if it is bad for the West then it is good for them, but the financial crisis has hit Russia harder than in the US-even with their supposed oil surpluses.

The 2008 financial crisis was a prefect storm, which no single problem explains. Why would the entire banking system in Iceland meltdown (or the ongoing meltdown in Turkey or BRIC) because of $300 billion of toxic US residential mortgages?

[Captain Hate]

Forgive me, if I put any bad images in your head!!! :)

Just that TCO should have to fit Jork into a dance leotard.

[PaulL]

*****More drama than yesterday's "24" special (maybe Jack Bauer should be enlisted to clean up the financial mess).*****

Jack could shout, "We've got to have the bailout now!!!! Thursday will be too late!!!!"

[RichatUF]

Rick-

I wanted to get your take on the 2.5 million jobs claims, mostly from infrastructure spending that is in the pipeline, as it compares to his fundraising efforts regarding CAC. It seems that he wants to take credit for the 2005 Highway Bill (a pork laden $290 billion monster).

I wonder when someone is going to whisper in his ear that oil and coal production can be taxed, it would bring high paying jobs to many areas including the rust belt, and it would "reduce our dependence on foreign oil".

[bgates]

Cap, "Hannity & McCain" sounds like one of those bad 80s cop shows.

Hannity (Hannity): Sometimes I wonder whose side you're on, McCain.

McCain (McCain): I'm on the side that locks up corrupt businessmen who make all that dirty money. I'm on the side that defends our government officials from illegal criticism. I'm on the side of justice, my friend.

Hannity: Quit calling me that. Your "side" is going to get us both thrown off the force.

Lieutenant (Michael Steele): Hannity! MCCAIN!! In my office, NOW!!!

McCain: What is it, my friend?

Lt: Quit calling me that. Explain this complaint from the Mayor's office.

McCain: We were on security at his campaign rally, and I saw the Mayor produce a speech from his jacket. I had to act.

Lt: We've been over this. Candidates are allowed to talk during their own campaigns.

McCain: It wasn't the speech itself, lieutenant. There was a crowd there. A crowd prepared to cheer. And that means-

Lt: Oh, not this again.

McCain: Carbon emissions. That many people, yelling and whistling and exhaling at once - it was a powder keg.

Lt: Hannity, where were you during all this?

Hannity: Sorry, lieutenant, but it was you fellas at hq who put him in charge. I had to back him up. Those are the rules.

Lt: I know the rules, dammit! And the rules say the oldest guy in the department is in charge. Well, McCain - I know the rules, and Hannity knows the rules. Why aren't you following the rules?

McCain: Sometimes a maverick has to make his own rules, my friend.

Lt: Stop CALLING me that!
******
Next time on Hannity & McCain: Hannity (Hannity) and McCain (McCain) try to solve old bombing cases with the help of their drug dealing informant Huggy Bear (Obama).

[clarice]

Well, Rich, when you figure it out don't post it. It could make war by other means obsolete, couldn't it?

[clarice]

One of your best, bgates..

[Elliott]

Great stuff, Rick and bgates.

[Rick Ballard]

Rich,

I just don't know. If we're lucky he'll focus on "investing" in schools in the prog hells by stuffing kids into preschools run by communisty organizers. I'll mark that as "no loss". Since he's never held an honest job in his life I have no idea as to how he will attempt to corrupt the "real" job market. He'll look to Summers rather than Gaither so that may hold some clues.

He's definitely going to direct stupidity by trying to accelerate the highway projects. Maybe we'll get really lucky and some of his communisty organizers will achieve St. Pancake status by standing in the wrong place while they're trying to figure out the purpose of all those great big machines?

[Antimedia]

PUK

So far he hasn't even carried the bride over the threshold.

Oh, you missed it? The bride is carrying the groom.

[Captain Hate]

Outstanding, bgates; I bow to your satire.

[Antimedia]

Jor

TM: You missed the story where "Whitehouse unaware of efforts to bail out Citi". SHEER INCOMPETENCE. Forbes called Paulson "the worst secretary of treasury in modern history".
Mission Accomplished.

Your accomplishments continue to amaze me. No other person on earth could read JOM and still believe every word the media writes, yet you continue to do so, uncritically, approvingly.

What other tricks do you have up your sleeve?

[RichatUF]

clarice-

I don't know if I should take that as a whack on the knuckles with a ruler?

[JM Hanes]

Libby shouldn't even have to ask for a pardon. I expressed my view over HotAir, which I won't repeat because it wouldn't surprise anybody here, but if Libby is still hanging out to dry when Bush leaves office, it will be to Bush's shame.

[clarice]

No, it's a compliment, Rich.Whatever means were employed to create this international economic havor..the first person who can master and reproduce them has found a new means to wage war..and it doesn't take giant armies and lots of armaments..just a couple of sharpies on one side..greedies on the other..

[Antimedia]

clarice

and it doesn't take giant armies and lots of armaments..just a couple of sharpies on one side..greedies on the other..

Well, there's no shortage of the latter.....

[JM Hanes]

PUK:

I started to Fisk your TimesOnline article, but decided life is too short. Apparently the honeymoon has gone global.

[Antimedia]

Here's a headline that had to cause severe angst on the left - "Obama, Bush ‘united’ in fixing economy"

As he unveiled his economic team Monday, Obama called the financial crisis one of "historic proportions" and said that he and the Bush administration are "united" in their efforts to get the economy back on track.

LUN