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April 23, 2009



TM, that wsj link requires a subscription.


In a way this lends supports Lewis' version of events, that he was strongarmed into the deal. Dick Morris has a somewhat related article today: Obama’s leap to socialism

President Obama showed his hand this week when The New York Times wrote that he is considering converting the stock the government owns in our country’s banks from preferred stock, which it now holds, to common stock.

This seemingly insignificant change is momentous. It means that the federal government will control all of the major banks and financial institutions in the nation. It means socialism.

The Times dutifully dressed up the Obama plan as a way to avoid asking Congress for more money for failing banks. But the implications of the proposal are obvious to anyone who cares to look.

When the Troubled Asset Relief Program (TARP) intervention was first outlined by the Bush administration, it did not call for any transfer of stock, of any sort, to the government. The Democrats demanded, as a price for their support, that the taxpayers “get something back” for the money they were lending to the banks. House Republicans, wise to what was going on, rejected the administration’s proposal and sought, instead, to provide insurance to banks, rather than outright cash. Their plan would, of course, not involve any transfer of stock. But Sen. John McCain (R-Ariz.) undercut his own party’s conservatives and went along with the Democratic plan, ensuring its passage.

But to avoid the issue of a potential for government control of the banks, everybody agreed that the stock the feds would take back in return for their money would be preferred stock, not common stock. “Preferred” means that these stockholders get the first crack at dividends, but only common stockholders can actually vote on company management or policy. Now, by changing this fundamental element of the TARP plan, Obama will give Washington a voting majority among the common stockholders of these banks and other financial institutions. The almost 500 companies receiving TARP money will be, in effect, run by Washington.

And whoever controls the banks controls the credit and, therefore, the economy. That’s called socialism.


O/T Did Hit get out of Myrtle Beach?

SC wildfire burns homes near popular beach area
Charlie (Colorado)

There's a bit more of it here.


TM, there's an awful lot of "implying" in those articles. Whom does one believe?

I mean, we've got an evil banker vs Giethner.

Is there a third choice?


Charlie, bad, browse Clusterstock and you'll find a series of posts on this whole business. That's why I think the the WSJ piece that TM links is important--it does, IMO, tend to support Lewis' version of events in this sense: by suspending Sarbanes-Oxley they were putting pressure on Lewis not to call off the deal, they were saying, "We're going the extra mile and your name will be mud if you don't play along. And then there were im/ex-plicit threats of "change". How the talks went we can't be entirely sure, but anyone can imagine the type of pressure that may have been used and how the Sarbanes-Oxley angle may have played into. IMO.


OT: Can someone define "the political class" for me?



It's a group of people who, by and large, lack class.


An oxymoron.



I define it as anyone in government, either elected, appointed, or simply employed. It is a phenominon identified by Max Weber, a german who basically founded the dicipline of Sociology. He argued (as opposed to Marx) that, rather than the state withering away as class distinctions were erasec by industrialization, in fact, the state would get much stronger, and would become its own interest group, or class. Marx viewed the state as simply an agent of the middle class that was used to keep the poor in line. Weber saw that the state would become its own class, with its own interests that would just as soon loot the middle class as the poor.


That's fascinating Ranger. Thank you!


CNBC is going nuts over this Ken Lewis issue.


To go even farther... Weber identified a key change in society with the adoption of the principle that the state has the sole legitimate right to use force. This "legitimate monopoly on violence" essentially makes the state invulnerable as an institution. Eventually, the state becomes the sole arbiter of all disputes, going so far as to make any violence illegal, even if it is under mutual consent (just offering to "settle this outside" becomes a crime).

BTW, this is why the 2nd ammendment bothers so many "well educated" people. State run and/or supported education essentially convinces people that only the state can use violence legitimately. Citizens don't even have the right of self defense in this system, they must wait for the police (the offcial agents of the state) to show up and protect them. The 2nd ammendment fundimentally challenges this idea of the states monopoly on violence, and must be done away with in their view.


State run and/or supported education essentially convinces people that only the state can use violence legitimately.

Boy do you see that philosophy in schools!! If a kid is jumped and beaten on by another kid, putting hands up to push the attacker off is preceived as aggression and results in the same punishment as that for the kid who attacked.

Kinda like Israel and the Palestinians....

Old Lurker

Suddenly a plethora of threads from which to post!

Back when Zero was saving homeowners from their mortgages, JOM was outspoken about the ripples that would flow through the mortgage markets in the future.

The LUN from Bloomberg lays that all out.

It is not a good thing to abrogate contracts if you want those same folks to lend more money in the future. And one wonders why capital is hiding.


Hmm. Hadn't looked at weapon as an unused-but-available protection against leaving the state without a popular check on runaway authority before, Ranger. Thanks.


Rick Santelli is reporting that YTY corporate tax receipts are down over fifty per cent. Think he said fifty seven.


YTY corporate tax receipts are down

IMO, the percentage has nowhere to go but higher as receipts will only decrease, with the earning reports we are seeing. Someone will correct me if I'm wrong, but with loss carry-overs some of this will last for years.

Rick Ballard

"Someone will correct me if I'm wrong"

But you're right. The Net Operating Loss carryforwards for the financial sector are going to be a significant asset on the books of the survivors.


Old Lurker, that Bloomberg article had all kinds of stuff in it. Did you see the intimidation by the housing groups?

I clicked a link to the NACA which is supposedly a non-profit "Neighborhood Assistance" group but the page has ads for mortgages from the same group at 4.375%, no down payment, no closing costs and it doesn't matter if your credit isn't perfect.

Where is that loan money coming from do you suppose?



I forgot to add that the loan is a 30 year fixed rate.

That's half a percent lower than what they want around here for a mortgage with good credit.


As one who saw signs of a turning economy earlier I'm getting rather concerned that the idiocies of this crew of human wrecking balls may be more transcendant than I could have imagined.
My earlier forecast was of a recovery this summer which would ultimately be undermined in a couple of years by Barry's tax hikes and cap and spend craziness.
But with the proposed interventions de jure and round the clock undermining of any semblance of certainty for the markets I'm afraid those green shoots are probably heading for a late spring hard frost.



Between idiotic policies, on, well, pretty much every level, I just don't see any "recovery" in the cards. What business would expand in this kind of atmosphere?


Here's some fiscal news that will surprise you since O is all transparent and accountable--- NOT. LUN


What business would expand in this kind of atmosphere?

Well, mine is, but then again it is on government money.


So, Paulson and Bernanke are turning on each other--one of the two of them threatened Lewis and his board, they just disagree on who did it. But then, it's always possible that they BOTH did.

We need a Truth Commission, alright--on the bailout/stimulus/whatever.


An expanded version of Why Housing Is Not Coming Back.

Rick Ballard


I agreed with your observations concerning a probable upturn and I agree again today - it ain't happening. It ain't gonna happen until those greasy dirty socialist hands quit fumbling around with levers and buttons, the function of which is far beyond the ability of those teeny tiny socialist minds to comprehend.

Consumers and capitalists alike are sending Zero a clear "strong letter follows" message and I truly believe him to be too ignorant to understand it.

Rick Ballard

"one of the two of them threatened Lewis"

Alternatively, Lewis' alligator mouth got ahead of his tweety bird ass when he went after Merrill, based upon minimal due diligence and backed by an ego almost as big as John McCain's.

"De gubmint mens made me do it!" doesn't sit well with me, regardless of its origin.


Here's a very cool idea that should appeal to Obama, who's well known for attaching expiration dates to his statements--legal tender with expiration dates!

And, as the blog notes, it fits right in with other liberal ideas, such as the idea that money is, basically, a gift certificate from your loving government. And gift certificates have expiration dates, so you have to spend them, like, fast! This concept should have enormous appeal for liberals.

Old Lurker

Bad, I did indeed see the role of the brownshirts in enforcing the mortgage cramdowns. Very helpful.

Rick as to corporate loss carryforwards and their impact on Fed tax receipts, why would one think those won't be disallowed in the corp tax rework pending for the common good? Why should a company receive an (loss carryforward) asset from the gummint because they paid all those bonuses to incompetent execs?


I just don't see any "recovery" in the cards.

I think we will see a recovery of sorts, but to a relatively slow growth rate. There are cycles and trends, and the cycles do cycle, but Obamanomics is going to kill the trend. The only growth industries are going to be government and rent-seeking (lawyers and lobbyists).

hit and run

O/T Did Hit get out of Myrtle Beach?

We're out. But mrs hit and run is heading down there tomorrow for a women's retreat.

She thinks. So far it looks fine where they're going. But the friend who is carpooling a group of them down there has informed the riders in her car that they're going . . . and if they're not going to Myrtle Beach then by golly they're going somewhere.

Anywhere where there are no kids and no husbands...

hit and run

And thanks for asking and good eye catching that story!


Glad to hear you made it Hit. Myrtle Beach was always a place I enjoyed. However, there are some long stretches of road, with nothing but pine and brush on both sides of the road, that would burn fast around that area.

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