Leverage, Credit - It's Almost Like "Banking"

Paul Krugman and "Calculated Risk" seem to be willful in their misunderstanding of the latest Treasury scheme.  The gist, as reported in the WSJ:

...one leading idea is to establish separate funds to be run by private investment managers. The managers would have to put up a certain amount of capital. Additional financing would come from the government, which would share in any profit or loss.

And here is the Calculated Risk analysis lauded by Krugman:

By offering low interest non-recourse loans, these public-private entities can pay a higher than market price for the toxic assets (since there is no downside risk). This amounts to a direct subsidy from the taxpayers to the banks. It is amazing how many different ways they've tried to recycle the same bad idea.

"No" downside risk?  Surely that depends on the level of non-recourse funding offered to supplement the equity contribution of the investors.  Yes, if the private-sector partners need only pony up $100 in order to secure $10 billion in non-recourse Federal loans, I would say they are not exposed to any downside risk.  But suppose the Feds think they can get more bang for their restructuring buck by leveraging up these investment pools by 2-1.  In that case, the private partners will put in, hypothetically, $10 billion; the Fed will then lend another $20 billion to the investment pool.  Thus funded, the investment manager can then acquire up to $30 billion in assets as part of the Fed effort to grease the credit markets.

Does the non-recourse feature amount to a subsidy?  Well, a subsidy compared to what?  Plenty of investment vehicles operate on a non-recourse basis every day.  That aside, the Fed is providing a put on the underlying assets at a strike of 67% of the purchase price; one presumes they have some right to approve the assets being acquired and one hopes they know what they are doing, because the investment manager clearly has an economic incentive to buy high-variance assets. 

Just as an example, suppose the manager accumulates $30 billion of assets that fall to $20 billion in price.  The Fed can call its loan, collect all of its $20 billion, and the equity investors will be wiped out.  Contra Krugman, that is sort of the opposite of "no" downside risk.  However, if the assets fall to $15 billion the equity investors are wiped out and the Fed loses $5 billion, so the investor downside is limited.

And where's the upside?  The article asserts that the Treasury may join the investment pool as an equity investor as well, which is fine.  Personally, I think the government's upside would be a restored financial system and a vibrant economy but heaven forbid somebody makes money while that happens.

Is the low interest rate on the loan also a subsidy?  Again, compared to what?  The motivation of the exercise is that markets are not working so the lender of last resort is stepping into the breach.  Presumably the Fed is offering a better rate than would be available elsewhere since no one else is offering these loans because we are in the midst of a crisis.  One might as well ask whether the fire department shows up to battle blazes at a subsidized rate.

Clearly this program has the potential to turn into a give-away, as government officials recognize:

The Fed and the Obama administration also are mulling whether to expand the TALF to existing distressed assets, also known as legacy assets. Such a move could allow the Fed to provide low-interest loans to investors who use the money to purchase distressed mortgage-backed securities or commercial real-estate loans. But such a move also would raise many new questions, among them the amount of protection the Treasury would offer against such risky assets. As a result, the idea might not move forward.

I liked the mother of all term repo idea last fall, so I like this variation of it.  I suspect Krugman will simply moan, whine, and misrepresent any idea other than nationalization.

[END OF THREAD]

Comments

[Rick Ballard]

"Presumably the Fed is offering a better rate than would be available elsewhere since no one else is offering these loans because we are in the midst of a crisis."

From the Fed Term Asset-Backed Securities Loan Facility: Terms and Conditions

The interest rate on TALF loans secured by ABS backed by federally guaranteed student loans will be 50 basis points over 1-month Libor. The interest rate on TALF loans secured by SBA Pool Certificates will be the federal funds target rate plus 75 basis points. The interest rate on TALF loans secured by SBA Development Company Participation Certificates will be 50 basis points over the 3-year Libor swap rate. For TALF loans secured by other eligible fixed-rate ABS, the interest rate will be 100 basis points over the 3-year Libor swap rate. For TALF loans secured by other eligible floating-rate ABS, the interest rate will be 100 basis points over 1-month Libor. The New York Fed also will assess an administrative fee equal to 5 basis points of the loan amount on the settlement date of each loan transaction.

[LindaK]

The government has been inconsistent and punitive, eg Citi, in dispensing TARP and TALF and other funds. This is the approach that Obama brings to our economy and society -- economic and social jihad. Cramer's right, Obama's engaged in wealth destruction perhaps to cover up the social revolution he and the leftie dems are so intent in pursuing.

[Tom Bowler]

I like the repo idea, too. Wasn't the crisis originally sold as a problem of liquidity? Presumably toxic MBS assets were being rejected as collateral, which "clogged" short term credit markets. The government would be substituting cash for toxic assets which would have to be repurchased at a later time when the assets themselves might have appreciated some, or the repurchaser would be in better position to bite the bullet and take them back.

Of course, if I recall correctly the crisis stopped being called a liquidity problem almost immediately. I don't know that the government ever did actually buy up any of those assets, choosing to buy banks instead. Now we need a New Deal. Nothing else will do.

[Rick Ballard]

It's a little weird to see the WSJ's "possibly non-recourse" transformed to CR and Krugman's non-recourse (without caveat). I'm wondering if the WSJ reporter on the initial piece may have conflated the new TALF program wrt non-recourse. "New" TALF loans are definitely non-recourse, they rely on an initial haircut plus a AAA rating by two 'nationally recognized statistical rating organizations' (Fitch's, Moody,s or S&P - there's a laugh).

Wouldn't a 30% haircut on the bad bank detoxification program loans serve the same purpose?

[clarice]

That's the way I remember it , Tom B but then I'm old and my memory may not be perfect.

[Pofarmer]

Obama says that the "Stock Market is kind of like a tracking poll."

What was this guys experience again?

What a Maroon.

[narciso]

No, you got it right, Clarice, that's why I was nominally in favor of the TARP. How 350 million dollars made it to the Obama
campaign in this liquidity crisis is a little unclear. It was all a Ponzi scheme, like when Soros and Co, shorted stocks in the days after 9/11.

[Porchlight]

Great comment on Politico in response to Ben Smith's post on Obama's "stock market is kind of like a tracking poll" inanity that Pofarmer quoted above:

If you're asking a group of wealth-creators if they'd like to invest in a plan that is guaranteed to strip them of as much money as possible, then yes, the stock market is kinda like a political tracking poll.

Posted By: Reesnixon | March 03, 2009 at 02:15 PM

I'd like to think that Obama is going to live to regret that comment, but then I keep underestimating his ability to avoid repercussions for any of his idotic remarks.

[Matt]

Krugman has just suggested an alternative to the banking system. Under the Community Reinvestment Act Public Occupational Liason Addendum, or CRAPOLA, ACORN will be given seed money amounting to $50 Billion to start the People's International Savings & Security Office For Finance, or PISS OFF, which will immediately begin lending money for agricultural and industrial collectives around the country.

Equipment from defunct reactionary capitalist roader corporations will be purchased by these collectives and installed by SEIU and UAW organizers. Installations will include back yard smelters, perpetual motion machine factories, and unicorn harnesses workshops. Collectively these products will be called People's Occupational Organization Products, or POOP. People's Occupational Organizations, or POOs, will replace corporations as they are currently conceived.

[clarice]

Very funny,Matt.

[Old Lurker]

The stupidity of these guys is really starting to tick me off.

LUN is a Bloomberg story about the "compromise" Cramdown law that will enable judges to rewrite all aspects of a mortgage contract. The quotes are all aimed at the evil banks who have "fallen on the ball" and refused to work with troubled borrowers.

Does anyone in Congress know that banks hold only a fraction of the mortgages in existence? What do they think Fannie & Freddie have been doing to move that paper from the banks to investors the world over? Are they really inept enough to legislate against the evil banks, not realizing how that will destroy the global system of moving capital from investors to borrowers?

Silly question, I guess.

Do they not appreciate that destroying these contracts might "help" current defaulting borrowers, but good luck rebuilding a new mortgage system when folks start buying houses again. If mortgage investments become as risky as credit card debt, then investors will price it that way.

[Matt]

OL;

the real problem is that no one knows who actually owns the notes themselves anymore. There is a legal strategem being given traction here in California to "produce the note" in the bankruptcy courts. More of a delaying tactic, but it presents an interesting dilemma.

With the way the financial markets sliced and diced mortgages, spinning off interest payments from principal, etc. no one quite knows who owns what.

[Pagar]

Installed by SEIU and UAW organizers
Matt, According to this report you just can't have any SEIU and UAW organizers, they have to look like certain people.

When he dared suggest that an improved Cobo Center would create more good-paying jobs for union workers, Conyers reminded him, "Those workers look like you; they don't look like me."

Desperate, he invoked President Barack Obama's message of unity and was angrily warned, "Don't yousay his name here."

I do hope that our commenter from Detroit can add to this report. The people on the Detroit City Council must be in training for jobs in the White House.

[Matt]

they don't look like shriveled up old corrupt politicians in $2,000 suits?

[Old Lurker]

Matt, that "produce the note strategy" works here in the east too. My banker buddies say the files really are a complete mess. But my point stands: whoever paid to own the notes now...they aren't the banks that packaged them. Your point is right and that means future investors in pools and trusts allegedly owning large numbers of notes or slices of notes are going to want proof of court-ready documentation in addition to my concern about the sanctity of the contract rights.

[Rick Ballard]

BK refs have been accepting sworn declarations from servicers to this point. If they start shifting to actual loan documents we'll never see another MBS sold.

OTOH - if no MBS had ever been packaged in the first place would we have "lost" anything?

[Matt]

the derivitives market has been a scam since it's inception.....3 card monte for the rich.

[bad]

Everytime cramdown mortgages are brought up, I think how homeowners would feel if we had to pony up because the mortgage company was in trouble....

Never mind....

[Charlie (Colorado)]

Look, folks, the problem is to see how to reduce the values.

It's cheaper for everyone to "cram down" the mortgages on houses that are underwater, but the MBS's are structured so that the banks can't do it 'cause they don't own the damned mortgages any more. Banks that owned the mortgages would be able to negotiate, because they know they'd lose more on a foreclosure; as it is, it more or less has to go through bankruptcy courts or something.

[Pofarmer]

Look, folks, the problem is to see how to reduce the values.

Oh, values are reducing quite nicely on their own.

but the MBS's are structured so that the banks can't do it 'cause they don't own the damned mortgages any more.

Somebody, Somewhere, owns the mortgage. But, there still isn't any good reason to MAKE them cram down the mortgage. If it's in their best interest then they can. If not, they can repo the house and try to resell it. Let the capitalist system work.

As if.

[bad]

The mortgage bailout isn't cheaper for people who live where prices didn't bubble and there aren't a lot of forclosures.

[Pofarmer]

Well, I just got my tax papers back today. I'd like to thank GWB for all those Tax cuts for the RICH, specifically advanced depreciations. George, it wasn't long enough.

[mel]

Matt-

Which derivatives? Exchange based, or private? There is a world of difference. A mortgage is, by it's very nature, a derivative of a direct loan, the basis of credit. But I digress.

The TALF announcement today was a major move, and was the tool that Bernanke has been asking for authorization of since last August, at least, by my estimate. His testimony, today, sealed it for me (took a bit, but I figured out the change up). Bernanke went out of his way to avoid commentary on the proposed "budget" and any administration position, other than the TALF, where he got the authorization to facilitate the swap of high grade ABS' with a Treasury stamp of approval, without the Treasury's involvement. That runs from classification of assets to approval of purchasers. NO political interference (comparatively).

This is a major step towards the separation of the economic from the political. And the look on Bernanke's face at the end of his testimony said it all. It just looked like he was walking away thinking "after this bit, you mopes own it all."

It's going to take some time for me to put all the phraseology together to explain it, but this is the development I've been waiting for, the bifurcation of the economic from the political, and the discovery of price, once again.

I was bouncing off the walls this afternoon, I was so giddy. I will note that Santelli laughed at me, but he will admit freely, I look at things a tad ahead of the rest of the pack.

Here's a bit of why I'm pumped up. The correlation of the markets to the Administration's "sinister fix" was vital to their continued plans. Bernanke being "off the bus" separates, in due time, the markets tandem arrangement that the Admin needed to grab their power. Now, the argument has changed back to just a political one. An argument the Administration knows it cannot win.

I'll be back as often as I can to explain this. This was a very big day.

[Rick Ballard]

Mel,

Is the GE CDS pop this afternoon an indication that 'something wicked this way comes' or is their some nice, soothing explanation?

[bad]

Mel, should I be praying for Beranke's safety?

[mel]

Rick-

If you can tell me who quoted it, I'll give you an answer. If it was referred to by the CNBC front office, it was the shorts looking for leverage.

CDS' are private markets, not publicly quoted nor traded, anybody tells you otherwise is making it up. Except AIG, and well, you know where they sit.

Good question, I like it.

Time for the rack.

[Wanda]

Fuzzy economics at its best. The Banks get creatve, we fall for it, and we suffer.
However, if the Banks suffer, we all suffer. This is not political, it is a legality issue. They gave us loans, we lost our jobs, now the banks still wish for full recompense?

What, may I ask, is stopping us from all filing for bankrupt? No one. The banks need a reason for being lenient and helpful?
No, they want the money, and we do not have it.

[Pofarmer]

Darn it Mel. Don't be such a tease.

[Rick Ballard]

I got it here. He had an earlier post concerning the "up front" portion which I found intriguing.

[Pofarmer]

They gave us loans, we lost our jobs, now the banks still wish for full recompense?

Them's known as "the breaks."

You asked for the loans, right?

[Neo]

Seems the Obama budget has $1.5 trillion savings by not having 10 more years of the Iraqi "Surge" .. something that even Bush hadn't planned on.

With accounting like this, you too can be a trillionaire.

[RichatUF]

Rick-

Re: GE could it be that they will have a liquidity crisis if their investments in Central and Eastern Europe all go to sh*t at the same time? They have real estate and infrastructure deals all over the region.

mel-

The correlation of the markets to the Administration's "sinister fix" was vital to their continued plans. Bernanke being "off the bus" separates, in due time, the markets tandem arrangement that the Admin needed to grab their power. Now, the argument has changed back to just a political one.

I'm not really following.

[bad]

Neo, Mr. bad and I are going to save even more than that. In addition to not funding the surge for the next ten years, we are not going to buy beachfront property in Dubai for the next ten years.

[Rick Ballard]

Rich,

It sure could be that. The EU is going to screw everybody east of Germany. Not that it will save the EU but somebody has to be first to meet Mr. Crocodile.

Could be the Asian submerging economies too. I see the Chicom liars are boosting the ante. Keeping the facade up on a Potemkin village is getting a little pricey. Even using slave labor.

[hit and run]

Would you buy a used car http://campaignspot.nationalreview.com/post/?q=NDM4YzlhNmYyODk4OTAwMDIwMmM0Mjc4MTcwNmMzYjc=>take market advice from this man?

Obama, today: "On the other hand, what you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."

Did he mean price-to-earnings ratio? The traditional definition of P/E ratio?

Barack Obama: Real man of genius.

We salute you, Mr. Profit-and-Earning-Ratios man.

[bgates]

Mom and dad will be so glad to hear this. By simply not staying in college for the past 15 years, and accounting for inflation, my family has saved nearly half a million in tuition alone.

[bad]

Would anybody else like to kick the ass of the wimpy little budget director? Even on my worse day I could take him...

[bgates]

Hit, it's unfair to take one little comment like "profit and earning ratios" and make Obama look foolish.

Just because he said "profit and earning ratios", and appeared to say there were 57 states once - that could happen to anybody.

I don't think "profit and earning ratios", "57 states", confusing Iowa with Ottawa, or having trouble finding the door in to the Oval Office indicates any kind of larger pattern.

Just because this is the only college writing of his we've ever seen, and he once lost his train of thought (and he explained he hadn't had much sleep), and he didn't notice his pastor of 20 years was a vindictive racist, and he messed up once and got involved in a house purchase with a guy who was under federal investigation for crimes that put him in prison, and his first press conference involved a cheap shot at a 90 year old widow that didn't even get the underlying facts right, and his first address to the nation had him erroneously claim the US had invented the automobile, that's not any kind of pattern of behavior at all.

And I resent, as Rev'm Al would say, your inference that it is.

[bad]

"On the other hand, what you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."

How Gergen-esque... Ask Mark Steyn...

[Elroy Jetson]

hit and run,
Well put. He is still the gaff master. How in the world did people feel more comfortable with his intellect as president than with Sarah's as a VP?
And I sure as hell would not be taking investment advise from Obama.

[narciso]

Higher rates on income, FICA, capital gains, bans on mercury production, blocking
of nuclear, oil, & gas, how can one have a positive long term perspective with this attitude.

[Amused bystander]

Bad: he may be talking from the governments perspective. Fire sale prices.

[narciso]

For those whose who are in the commodity field, how realistic is this scenario, LUNed
below

[kim]

Not to mention that he's considering PEs with past earnings. The projected PEs may not be attractive yet, 'on a long term perspective'.

Gad, what a moroon. How does he fool those around him?
========================

[hit and run]

bgates:
that's not any kind of pattern of behavior at all.

And I resent, as Rev'm Al would say, your inference that it is.

Oh, I hear ya, bgates. And just to help balance what I said before, I must compliment him on his pronunciation, for which there really is one word, "elegant". That is, since "articulate" is racist.

I also can't help but also notice and compliment his amazingly discernible lack of "uhs", even if it is just the generosity of the transcriptionist, because there are usually so many.

I mean, sure, I may wish that he actually knew what he was talking about, rather than just verbally dancing in circles, but that's just the old way of thinking which he's told us is no longer welcome in Washington.

I believe him.

[kim]

I'll bet he doesn't really understand the importance of earnings in that ratio. He's the sort of fool that professionals live upon.
=======================================

[Amused bystander]

kim: They went to Harvard too.

I bet he "fools" no one, they are just pumped up with their new power, and welcome the babblings.

They do not give a fig from the economy, the country or the rest of US. They just want power over us. I am sure that they do not know a positive thing about it. I am sure that they did not even notice this gaffe and in fact thought that the O was showing off that brilliant mind of his.

They know how to game systems, they have no idea how to create wealth, how to actually stand on their own and work toward a creative and positive goal. They are giddy, self-absorbed parasites.

It is not a question of fooling them, it is a question of not disturbing them in their self-delusions.

They can live in their dreamworld for a whole lifetime.

[kim]

Some clever reporter ought to ask him the difference between profit and earnings. Heh.

It might be a marvelous opportunity for the world to see the flim-flam that inhabits every fibre of his being.
===============================================

[kim]

'infests' instead of 'inhabits'.
==============================

[centralcal]

"How does he fool those around him?"

He is surrounded by equal fools.

[hit and run]

Evan Bayh says Senate should reject the omnibus or Obama http://online.wsj.com/article/SB123612545277023901.html>should veto it.

[hit and run]

Bayh shoulda been Obama's VP.

But the irony is, if confronted with actual competence, Obama would have sought to marginalize him to avoid as many comparisons to himself as possible.

But with Biden there is no such threat. So Biden gets the middle class task force, the implementation of the stimulus, the sheriff's badge, etc.

The good news, though it may not be evident, is not unimportant. It appears that with these domestic agenda items, Biden will be taken off of the state funeral circuit. Because no good can come of that, and odds are that he would end up getting us into a shooting war after shooting off his mouth.

[Amused bystander]

Wow. For Bayh to say that means that the Libs are are getting a lot of heat for their voters.

[ben]

Right, Obacon is going to veto pork....fat chance.

[Soylent Red]

They know how to game systems

You've said this before, AB, and it touched off a train of thought in my head.

Obama "gamed" the caucuses and primaries. He then gamed his campaign financing and voter registration. Through ACORN, he gamed the general election. At every step of the way he succeeded through by circumventing or coopting an existing system or rule set.

This all got me thinking about a nephew of mine, who is typical of an entire generation of people (and an Obama voter). Many of them are "gamers" in the sense that they play video games, but are also "gamers" in that they set out to master exploitation of rigid systems rather than master the necessary skills to operate within that system. In the video gaming world, I believe this to be the driver of the sharing of "hacks" and cheat codes.

Likewise, this group of people idolizes the computer hacker, to such a degree that computer hacker culture and nomenclature has become part of geek culture, so pervasive in Gen Y. They have coined terms like "White Hat" and "Black Hat" in order to distinguish good from bad hackers by intent.

It appears to me, that somewhere along the way Obama became aware that he needed to instill confidence in the market in order to swing it back up. To that end, he did what he does: attempt to find the system hack. The system, in this case, is consumer confidence. Thus, dropping terminology (however incorrectly) and talking up investing, to get the public to believe that he actually knows what he is doing and that everything is cool.

This is an interesting group we are dealing with, in the White House (in the way bubonic plague is interesting). But I think this inability to work within the system, and unwillingness to learn how, forces them to fall back repeatedly on circumventing the system. I think this is a key to understanding and defeating what Obama is up to.

On another note...

What is the esteemed legal opinion in this forum of the following:

By becoming President, and therefore CiC, does a sitting President fall under UCMJ?

[matt]

Has Biden gotten his badge and hat yet? I hear if he's good they'll give him a horse too.....

[hit and run]

http://apnews.myway.com/article/20090303/D96MR05G2.html>Geithner:

the Treasury secretary acknowledged that consumers could face higher electric bills because Obama would impose fees on greenhouse gas producers, including power plants that burn fossil fuels, by auctioning off carbon pollution permits. The goal is to reduce the emissions blamed for global warming while raising a projected $646 billion over 10 years.

“Now, if people don’t change how they use energy, then they will face higher costs for energy,” Geithner said.

Now DON'T knock Obama for this, people.

He's broken so many campaign promises, but this is one he's actually keeping.

You can't set your thermostats at 72.

And get a friggin tire guage.

Oh and of course, http://hotair.com/archives/2008/11/02/obama-ill-make-energy-prices-skyrocket/>he was very specific about skyrocketing energy prices.

I mean, sure, knock him for keeping the one promise where he was actually honest about trying to bankrupt an industry and pick the pockets of nearly every person in America.

Sure, he coulda kept one or more of his promises about not raising taxes, net spending cut, line by line in the budget, no earmarks, standing up to his own party, working across the aisle in a post partisan way, transparency, no lobbyists, or whatnot.

He just happened to like the robbing us blind promise more than the others.

And since many of the other promises would kinda impede him from robbing us blind, he kinda had to break them, now didn't he? Well, didn't he?

[Neo]

Has anybody seen a story about the Fiscal Responsibility Summit ?

It seems that Obama was saying something like .. Repubs ought to take part .. then a Repub Rep said they would if they could get Pelosi to give them a seat at the table .. Obama responded with some stuff about obstructionism (i.e. "The Won" wasn't going to tell Pelosi to give them a seat).

This seems to be the ultimate "Catch-22" when it comes to the Republicans position on the Hill.

[E. Nigma]

Soylent Red,
That is one of the clearest and most astute insights into the Obama Administration I have read. It rings true.
The consequence is that they continue to kick out the supports to the economy, and think they can "game" their way to prosperity. They've convinced themselves that they can defy gravity.
And you need look no further than Giethner's asisnine comment quoted by hit and run. All the electricity I use and millions of others use is generated by coal-burning power plants. Are we to shut them all down, tomorrow? And replace them with...what? When Ohio utility companies, and AEP get hit with these "carbon permit user fees", the next step is to hit the Public Utilities Commission of Ohio (PUCO) and get rate hikes. So who pays?
Clues everywhere.

[kim]

I'll bet he's not subject to UCMJ, Soylent; he's not in the military, even though he's in your chain of command. In there in a dangerous position, I might add.
=======================================

[Old Lurker]

Kim, he is a fool. No doubt about it.

As said often: an investor pays for a share what he thinks his stream of after tax dividends will be reduced to present value by applying a discount rate that reflects that investor's estimate of the risk of his projected after tax dividend stream.

So each investor consciously or unconsciously estimates E, corporate taxes on E, then dividends likely paid from the after tax E, then his personal taxes in the D...then discounts it all at some rate down to present value.

No investor can have a clue what the E's will be given all the mandates and costs that will saddle corporations - card check, health care, cap & trade, corp taxes, new corp taxes on foreign earnings to list but a few, nor the D's that can be paid to investors (note all the reductions in dividends occuring right now are not just because of the recession's impact on earnings, but also because corps need capital in a strained capital market where govts will soak up more than before, and the easiest capital for a corp to tap is the dividend not paid).

Then the investor has to worry about how he will be taxed on dividend income. And finally he must assume the future is much cloudier and risky than before these clowns arrived, and they have to guess where we are headed on the continuum between where we were and where Hugo Chavez is when assigning a discount rate for the long term risks here relative to all the other places in the world.

[hit and run]

http://www.politico.com/news/stories/0309/19587.html>Bayh is not alone:

Moderate and conservative Democrats in the Senate are starting to choke over the massive spending and tax increases in President Barack Obama’s budget plans and have begun plotting to increase their influence over the agenda of a president who is turning out to be much more liberal than they are.

A group of 14 Senate Democrats and one independent huddled behind closed doors on Tuesday, discussing how centrists in that chamber can assert more leverage on the major policy debates that will dominate this Congress.

First republican that offers these people the heimlich gets a kick in the nuts. I'm looking right at you Specter.

The article mentions Bayh (IN), Landrieu (LA), Nelson (NE), McCaskill (MO), Begich (AK), Pryor (AR), Warner (VA), Nelson (FL), Klobuchar (MN), Shaheen (NH), Casey (PA), Lincoln (AR) and Lieberman (I, CT).

That's only 12 Dems and Liberman makes 13, if you can trust my count without me taking my socks off. The article says 14 Dems plus Lieberman???

Tester (MT) is mentioned but not a part of the group that met.

Who knows, maybe I missed the 14th and 15th.

(I secretly wish Burris was there)

[kim]

The carbon taxes are insane and regressive. What's not to like about them?
==========================================

[hit and run]

http://www.politico.com/news/stories/0309/19587.html>Bayh is not alone:

Moderate and conservative Democrats in the Senate are starting to choke over the massive spending and tax increases in President Barack Obama’s budget plans and have begun plotting to increase their influence over the agenda of a president who is turning out to be much more liberal than they are.

A group of 14 Senate Democrats and one independent huddled behind closed doors on Tuesday, discussing how centrists in that chamber can assert more leverage on the major policy debates that will dominate this Congress.

First republican that offers these people the heimlich gets a kick in the nuts. I'm looking right at you Specter.

The article mentions Bayh (IN), Landrieu (LA), Nelson (NE), McCaskill (MO), Begich (AK), Pryor (AR), Warner (VA), Nelson (FL), Klobuchar (MN), Shaheen (NH), Casey (PA), Lincoln (AR) and Lieberman (I, CT).

That's only 12 Dems and Liberman makes 13, if you can trust my count without me taking my socks off. The article says 14 Dems plus Lieberman???

Tester (MT) is mentioned but not a part of the group that met.

Who knows, maybe I missed the 14th and 15th.

(I secretly wish Burris was there)

[bad]

(I secretly wish Burris was there)

I have this vision of Burris trying to be a snitch for Rahm, scuttling into bathroom stalls to eavesdrop on conversations, hiding in closets with a recorder, spy camera in his lapel...

But that's just me.

[hit and run]

Unlike others who are tempted to apologize for double posts, and blame the evils of typepad for same -- I am going to claim I did it deliberately and defiantly.

Because I have nothing better to do.

[RichatUF]

narciso-

Re: the article, his reasons:

Global demand is among the biggest. Pent-up demand is exploding in growth areas like China and India. Once that global manufacturing engine begins firing again, you can count on energy prices ramping up. Here in the U.S., demand is down dramatically, but as the economy recovers, it will pick up swiftly. Any economic recovery results in higher energy prices -- it's elementary. That means $300 crude oil could be one year away or three years away, but certainly not much more. There's been almost no progress on the march to alternatives. The global investment engine has ground to a halt. With oil prices at these levels and the market in tatters, the last place investors want to put their money is in the alternative energy space. Every sector from uranium miners and clean-coal technology to bio-fuels and oil drillers has seen investment and share prices dry up. The call for building of new refineries and pipelines has all but gone silent. But OPEC has cut production across the board. We already are seeing supplies start to taper off. Eventually, demand will catch up with supply and we'll be right back in the same boat we were in a year ago. The realities are chilling. The largest oil field in Mexico Cantarell is still in major decline and when it does run out civil unrest in that nation could explode. These types of chokepoints, both political and physical, still exist with several major oil exporting nations.

Hahahahaha...this guy is a professional commodities trader. China and India had outsized demand growth because of 1)energy subsidies which have been reduced or eliminated; 2) a one off event spike (Olympics); 3)US export demand driving their re-export and "outsourcing" industries.

Brazil, Greenland, Iraq, and the re-opening of the Gharwar field more than make up for the mismanagement of Mexican and Venezuelan oil industries (and I wouldn't be surprised to see Mexico start to turn their situation around, no one thought that Colombia could turn their's around either). OPEC has to cut production because they don't have the storage space (and their isn't enough floating storage) to make up the short fall in Asian oil exports. Dubai has already been bailed out, which signals to me that OPEC discipline longer term will crack as other budgets are pressured and they have to sell at any price, everything they can to raise capital (oil, gold, and silver are the most obvious).

I'm leaving out the Russian-Iranian interference of Caspain Sea and Central Asian supply for the time being because Iraqi production more than covers projections and possibilities from the region.

In short, the dynamic which pushed prices to $147-a KSA supply squeeze, Russian-Iranian gaming, and outsized demand growth (esp. exports to the US) are all in reverse. Those who believe the "professional" commodities trader who worte that article will wake up to that horrifying reality soon.

[narciso]

You're going to gag, or want to protect the monitor, when you see this story; not even
a 'decent interval, then again 'they won'
didn't they:

[kim]

I wonder if those Democratic senators are beginning to notice the primroses lining the path Obama is leading them down. An outraged and struggling polity is perfectly capable of 'trowing de bums out'.
===================================

[sbw]

[OT] - Listening to some discuss personal experience, I was feeling snarky about schools:

We imprison our children in schools so that teachers — graduates of such schools, certified with advanced degrees — can test current students on their success at testing schools for success.

When students fail, they are punished with stricter rules for not living up to constantly changing standards while their teachers are rewarded with more money for having failed.

Meanwhile, savvy teachers -- who are not necessarily the good ones -- escape to become administrators or guidance counselors, empowered as jail trusties to fetter good teachers to address the failures of the poor ones.

As a result, schools produce adults proud of their ignorance and ability to bully, and no one seems to care.

[/OT]

[kim]

Blame Bush is simply not going to work after all these Obama machinations. The ongoing destruction is in his lap and on his watch. Had he a conscience it would be on that, too.
====================================================

[Danube of Thought]

President is not subject to the UCMJ.

Headed out in an hour for four days in southern Baja, between Cabo and La Paz. Big house right on the water. Plenty of booze.

[hit and run]

DoT, I suppose my invitation got lost in the mail.

[bad]

Have a great time, DoT. Isn't it a sin to let booze go undrunk?

[RichatUF]

H&R-

First republican that offers these people the heimlich gets a kick in the nuts. I'm looking right at you Specter.

Come as an emissary, work as a spy. The Dems are jerking the chain of "moderate" Republicans and the muddle to put some more grease on the President's agenda. A "less ornerous" air tax is still an air tax-regardless of how much the EPA is going to charge for the permits (esp. now with emissions decreasing, the emission's baseline will be in a recessionary environment). I'd have believed them if they voted no on the Porkulus bill, got to work on a real banking and mortgage plan, and finished the 09 budget. What they are doing is theater.

[Sue]

Kim,

They have a new target. Rush Limbaugh. Follow the link from Drudge. Begala, Carville, Emanuel, Axelrod and the other nut with Obama have decided Rush is the new Bush/Cheney.

[Rick Ballard]

SR,

That's an excellent observation. The CBIC has no particular 'mad skillz' whatsoever, aside for the ability to grab a shabby avatar to project to the gullible. The problem is that there is no 'Game Over' point and he can't log off. You may be right that he will ignore the slap administered to him by Medvedev and, like Bozo, the inflatable clown, just bounce back to take another slap. At some point even the most gullible will grow a little weary and tune him out.

ADP suggests that another 700K Americans had their leisure time increased significantly in February, raising the total enjoying lots of extra free time to very close to 2.5 million since the election. It's a very safe bet that over half of them were among the gullible on election day. I wonder how many are already tired of watching Bozo bounce?

[mel]

Rick-

Was this the "up-front" quote to which you were referring?

"General Electric Credit Corp CDS has begun to trade on an upfront basis. Demanding payment up front is a particulat rite of passage in which the market expresses less than enthusiastic confidence in a credit."

Does this mean that they might trade on "no-money-down" basis, ordinarily? (GASP, Shock, etc.)

Thanks for John's link, I read his stuff all the time at SeekingAlpha, but lately he's been rudderless and playing catch up, in my opinion, only.

Those that are quoting this stuff have vested interest in the direction of the price of the asset. There is NO transparency.

More later.

[clarice]

Hit and Soylent, very great posts this morning. Soylent, I wish you would write that notion about gaming up in an article for AT and Hit why not blog the article on 14 for AT..I didn't see that they had anything up on it yet?

As for the blud dogs in the House I read a persuasive article last night that suggests they and Pelosi are playing games where she lets them vote against her stuff only when it doesn't count.

[Porchlight]

OT - a sweet tribute to Paul Harvey from Fred Thompson in the Wash Times:

Thompson: Paul Harvey...good day!

Most radio listeners knew that the most successful radio program in history was coming up at noon. Paul Harvey would make us feel at home. He made it clear that he understood who we were, where we came from, and he didn't think we were hicks or rubes for believing in America.

Amen, Fred, and RIP Mr. Harvey.

[kim]

Outrageous demonizing of opponents has replaced competent governance. Why the politically aware among the moderates and the leftists don't recognize this descent into madness, I don't know. It's becoming more clear every day.
===========================================

[Soylent Red]

I wonder how many are already tired of watching Bozo bounce?

Was that a bounce or a bob? I'd better check my my profits-to-earnings ration just in case. What was the internet number again?

[Pagar]

Obama "gamed" the caucuses and primaries. He then gamed his campaign financing and voter registration. Through ACORN, he gamed the general election. At every step of the way he succeeded through by circumventing or coopting an existing system or rule set.

IMO, there is no way Obama is doing all this gaming by himself. However, if you look at who is surrounding him, there are an awful lot of Harvard, Columbia U, Stanford etc people in that crowd. For example, Look at the link PUK gave us last night for his science advisor.

What none has yet noted is that Holdren is a globalist who has endorsed "surrender of sovereignty" to "a comprehensive Planetary Regime" that would control all the world's resources, direct global redistribution of wealth, oversee the "de-development" of the West, control a World Army and taxation regime, and enforce world population limits. He has castigated the United States as "the meanest of wealthy countries," written a justification of compulsory abortion for American women, advocated drastically lowering the U.S. standard of living, and left the door open to trying global warming "deniers" for crimes against humanity

The more times I read the article, the more I am convinced that it is a group of leftist educators that is controlling Obama.
The same group that is being installed in positions of power in every area of the US government right now.

The more I read about Dr Holdren, the more I am convinced he should not hold any position anywhere in the American system.

[RichatUF]

Rick-

If the Obama Adminstration keeps it up at this rate, they'll be able to hit their 5 million new green collar jobs number by June;)

[narciso]

Anyone know why the market is up, it's not the fundamentals, with nearly 3/4 of a million unemployed, with terrible earnings reports. Is it contrarianism, a 'dead cat'
bounce, these short sellers reversing themselves. I would love the for the portfolios to stabilize, but based on actual facts, or failing that; effective
projections.

[bad]

Hit, Fox just said Feingold is part of that group you mentioned.

[hit and run]

Rick:
ADP suggests that another 700K Americans had their leisure time increased significantly in February

There has been at least one in March. That I know of. Personally.

The good news is, Obama gonna have a pretty hard time getting much more income tax outta me for the forseeable future.

The bad news is, under our new belt tightening environment, I fear for the consequences to the beer industry.

The good news is, Citi, who holds our mortgage, http://www.google.com/hostednews/ap/article/ALeqM5jlW27DGaQ3AJv88EMr-WcK37-55AD96MSAP80>announced yesterday that they were going to lower some mortgages for the unemployed.

Then again, we aren't going to miss any payments and thus won't qualify.

No but seriously, we're fine, we'll be fine, we'll probably end up selling the house in any event and reduce our costs, and I have no idea where my next job will be, but I'm not concerned. It sux, but we're so very blessed in so many ways that this is a minor blip in life.

But I do covet your thoughts and prayers for my family.

[RichatUF]

Rick-

Might be a bear raid developing to punish GE for giving Santelli and Cramer a microphone? I'm a bit surprised that Cramer's producers went ahead with a week's worth of "How to Obama Proof" your portfolio. Wouldn't it be easier to find the 5 companies best represented within the administrations ranks (former board members, advisors, representitives, contributions) and park your money there?

[kim]

Bummer, hit.
===========

[bad]

On my knees, Hit.

[Porchlight]

Sorry to hear that, hit. You have my thoughts and prayers for sure.

[Amused bystander]

Well the current story about the market is positive reaction in China to the Chinese "stimulus package".

Asian markets were up last night, and this is cited as the reason by most financial reporters.

This could be right as far as today's US market "rally" goes.

Long term, I truly doubt that China, or any of the BRICS, will pull us out. They certainly not do it through government "infrastructure projects". I imaging that there are some people making some money today by playing to the forlorn hope that somehow this sort of thing will work.

I am sure that the MSM will try to spin this, but the newest budget will be a killer, particularly Cap and Trade. I think that we can expect new lows soon.

....

The blue dogs are just being given cover by the Dem leadership here, that is for sure.

[RichatUF]

hit and run-

I'm sorry to hear the news. My prayers and best wishes.

[clarice]

Hit, I was afraid of that possibility given the industry you were in. You and your family are in my thoughts and prayers.

[DebinNC]

#2 and #3 here may mean BO's plan all along was to show "bipartisanship" via "moderate" Dems and ignore the Reps entirely, since they're the "Party of NO" and all. It's a win-win-win. BO looks persuadable, center/left Dems look like deficit hawks and gatekeepers to future BO overreaching, and Reps look irrelevant.

[jean]

Hit I'm so sorry to hear about your troubles.I don't know if this will help Auto-Zone has been making a profit.I don't know what your profession is ,but Auto-Zone might be a place to look

[clarice]

narciso:
http://sweetness-light.com/archive/top-palin-foe-gets-job-from-obama

[hit and run]

Thanks all, this is a wonderful community.

And ain't that the truth, Clarice. I at least did some good by preparing mrs hit and run for the likelihood. It coulda been a lot harder for her if it had come as more of a surprise.

I don't Blame Obama, but he sure as hell didn't help things one bloody bit.

[DebinNC]

So sorry, hit. Our family will be praying.

[Amused bystander]

Sorry hit.