Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1256.7 | 1.8 | 0.14% |
| Eurostoxx Index | 2354 | -2.710 | -0.11% |
| Oil (WTI) | 101.04 | -0.240 | -0.24% |
| US Dollar Index (DXY) | 78.665 | 0.170 | 0.22% |
| 10 Year Govt Bond Yield | 2.08% | -0.01% |
Markets are flat this morning on a slow news day. The Europeans continue to bicker over the structure of rescue funds. Euro sovereign yields are more or less stable. No major economic data is being released this morning. Tomorrow we will get initial jobless claims. The street is at 400k, more or less the typical number. Let’s see if last week’s unexpected drop in unemployment is reflected in the initial claims.
The Fed is disputing the Bloomberg story (widely repeated) that the Fed secretly lent $7.8 trillion to the banks during the financial crisis. They claim that on any one given day, Fed credit for the liquidity programs was never more than $1.5 trillion. “These articles … have contained a variety of egregious errors and mistakes,” Bernanke told the chairmen of the U.S. Senate Banking and House of Representatives Financial Services committees. The funny thing about this whole episode is that what is being called a “bailout” is really just the Fed lending against solid collateral to cash-short banks. It is what Central Banks do, and it is the reason why we have them in the first place – to provide liquidity in a crisis so that we don’t have bank runs.
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All Things in Moderation 
In the 50s, the entire federal budget was between $70B and $80B annually. We financed WW2 on a quarter trillion, as I recall. I am not advocating a return to that budget or those 90% tax rates, either. It is just offered as an illustration of number creep, and how we mortals cannot keep pace.
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Yes, and Getihner says we are not bailing out Europe. What else did we expect them to say?
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Brent:The funny thing about this whole episode is that what is being called a "bailout" is really just the Fed lending against solid collateral to cash-short banks. It is what Central Banks do, and it is the reason why we have them in the first place – to provide liquidity in a crisis so that we don't have bank runs.Quite right.More on this from the WSJ this morning:But lending against collateral to solvent, but cash-short, banks during a panic isn't among the Fed's more controversial moves. That's what central banks have done since 19th-century England. And the Fed didn't lend anywhere near $7.7 trillion. Nor did it keep the size of its lending secret, though it did unsuccessfully try to keep the borrowers' identities secret…In fact, the Fed never came close to "committing" to lend that much. The total reflects not what the Fed had actually laid out nor the sum of its promises. Rather, it adds the ceilings set on a number of emergency programs, some of which were more hype than reality. It counted, for instance, $900 billion for something called TALF (for Term Asset-Backed Securities Loan Facility), based on Treasury statements that the program might someday reach that size. In fact, the Fed board authorized up to $200 billion in loans, and actually lent $71 billion.
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john:Yes, and Getihner says we are not bailing out Europe. What else did we expect them to say? Is this meant to imply that the Fed did lend $7.7 trillion?
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scott:Here's the link I posted last week, maybe you missed it:Don't know if this guy is a crazy or not, never saw his stuff before. In this case, he is accurate on his facts though;http://theeconomiccollapseblog.com/archives/have-you-heard-about-the-16-trillion-dollar-bailout-the-federal-reserve-handed-to-the-too-big-to-fail-banksAgain this isn't rumor or hearsay, most of this is from the Congressionally mandated Fed audit
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I guess it's on… like Donkey Kong. Here's Bloomberg's response to Bernake's letter.I'm curious if Obama will blame the internet for Geithner's tax cheating, er, errors, along with it being responsible for unemployment?
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scott:Also "lending against collateral: is a red herring that is both true and not true. The Fed effectively speaking lent at par on assets with a mark to market valuation of perhaps 50% or less. they also lent to both investment houses and insurance companies, not just banks.Like Geithner's statement yesterday, they are placing language in dispute, since they can't dispute substance.
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john:From your link:The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans.This tells me that the $16 trillion figure isn't particularly meaningful. For example, suppose bank X borrows $50 billion from the Fed in overnight loans, and repeats this daily for a week. I suppose it may be linguistically accurate to say that the bank borrowed a "total" of $350 billion, but it isn't particularly useful or meaningful to put it in such a way.
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scott:TMW's link is particularly devastating as a point by point rebuttal of the Fed. Again, the Fed is disputing the language and as Geithner put it yesterday about Europe "inaccurate reports" not the substance of the claims.
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As to why the above matters, playing down the size of the rescue required, the extraordinary extra-legal means that were used and necessary, feeds into the hands of those who want to return to business as usual with little oversight and enforcement (to say nothing of prosecution) of those institutions who recklessly cost the US hundreds of billions if not trillions in debt and lost productvitiy.
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john:The Fed effectively speaking lent at par on assets with a mark to market valuation of perhaps 50% or less. they also lent to both investment houses and insurance companies, not just banks.Well, the investment houses were actually converted to banks so that they could access Fed lending. And yes, it is true that they accepted collateral at par rather than MTM. But that was the whole point…there was no market for much of this collateral, and so it could not be converted into cash in the market. Hence the liquidity crisis. The Fed solved this by lending against the collateral for which there was no market price. This was not a secret.BTW…any idea how much the Fed lost on the collateral held against any of these o/n loans that did not get repaid? (This is not rhetorical…I don't know the answer, although I suspect it is very little, if anything.)Finally, do you really find it more meaningful and useful to speak of an overnight credit line in terms of the line multiplied by the number of days it is used rather than the amount at risk on any given day?
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john:…playing down the size of the rescue required…Inflating it is just as bad as playing it down, I think. And I definitely think that characterizing an o/n loan of, say, %50 billion which is lent for 7 days as a "total" of $350 billion in loans is unjustifiably inflating the size of the loan made.
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scott:I will give you the overnight argument. It makes sense. I don't know how much is left in the Maiden Lane porfolio. You occasionally hear stories about attempts to unload it but I haven't seen any recent accounting.
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"BTW…any idea how much the Fed lost on the collateral held against any of these o/n loans that did not get repaid? (This is not rhetorical…I don't know the answer, although I suspect it is very little, if anything.)"There was a further cost, perhaps we will realize down the road, but the Fed was creating money to do these bailouts, or implying the existence of this money, which will ultimately result in significant inflation.My question for Scott, John or anybody else. Was this bailout required? Why do you trust Paulson, Bernacke and Summers claims of gloom and doom? I have my doubts because to them, their whole world consists of Wall Street firms, and they cannot imagine a world in which those institutions are under duress and/or failing/failed. That doesn't mean that the world would not go on however.
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TMW:Wow, that's a big one. There's too much "what if" running in any alternate scenarios for me. I'm a here and now kind of guy. I think that was the whole point to them. They knew the fiscal and monetary risks they were running by intervening, versus the great fear of Terra Incognita as the maps used to say.
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McWing:There was a further cost, perhaps we will realize down the road, but the Fed was creating money to do these bailouts, or implying the existence of this money, which will ultimately result in significant inflation.Agreed.Was this bailout required?I don't know. I wonder about that a lot. I think it is probably fair to say that, in the near term, the economy would have been much worse off without it. But it is not clear to me that avoiding the short term pain is worth the longer term risks involved. Certainly from an ideological point of view, it isn't.…because to them, their whole world consists of Wall Street firms, and they cannot imagine a world in which those institutions are under duress and/or failing/failed.Actually I think they could imagine such a world, and imagined it to be very ugly for everyone. I'm not at all sure that the apocalyptic concerns of 2008 were entirely justified, but I'm also not sure that Wall Street's importance to Main Street (to put it in terms I actually hate to use) isn't often underestimated out on Main Street.
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We shouldn't talk about the creation of money as if it is a past event:"Keep in mind that any use of the Fed’s swap facility expands the Fed’s monetary base: all dollars, no matter where they are deposited, whether it be Kazakhstan, Japan, or Mexico, wind up back in an American bank. This means that any time a foreign central bank engages in a swap with the Federal Reserve, the Fed will create new money in order to make the swap. Use of the Fed’s liquidity swap line in late 2008 was the main cause of a surge in the Fed’s monetary base at that time. The peak for the swap line was about $600 billion in December 2008. Some observers will therefore say that the swap line is a backdoor way to engage in more quantitative easing"http://www.cnbc.com/id/45492703
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john:We shouldn't talk about the creation of money as if it is a past eventGood point.
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Did any of you see this last spring? Do any of you know whether it is true, and what is happening now?http://online.wsj.com/article/SB10001424052748703806304576242420737584278.html
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Mark:I missed that. Very interesting.
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Behind the wall, but this is probably equivalent on the subject:http://www.dominionpaper.ca/articles/4276
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"I'm not at all sure that the apocalyptic concerns of 2008 were entirely justified, but I'm also not sure that Wall Street's importance to Main Street (to put it in terms I actually hate to use) isn't often underestimated out on Main Street. "I agree with you on that. I also think the most dangerous thing to "mainstreet" is perpetuating the myth of something being "To Big To Fail"
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"Was this bailout required?I don't know. I wonder about that a lot. I think it is probably fair to say that, in the near term, the economy would have been much worse off without it. But it is not clear to me that avoiding the short term pain is worth the longer term risks involved. Certainly from an ideological point of view, it isn't."What drove me to distraction was the idea that the markets (and by extension the public) couldn't handle the truth about which banks had good balance sheets and which ones were screwed up. So you end up with solid banks being forced by the Federal government to take TARP money as well as the bad ones to help cover up the state of the bad ones. And no, I don't trust the results of the stress tests.You don't restore confidence with a cover up.
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Here's a similar article for those who don't subscribe to WSJ.http://www.judithlevy.com/?p=523Whatever happens, it'll take a while to build the infrastructure necessary to support extraction on an exportable scale. But 8-10 years from now, this could be substantial.
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Too big to fail should be, in my opinion, too big to stay that big. You either need to be small enough that your failure won't take down the entire economy, or you need to be broken up. That's the sort of trust busting that might actually be necessary . . . Off the top of my head, I can't think of one, but I know there are more than a few allegories out there that illustrate how everyone plays an important role, and the fat cats on Wall Street don't realize how dependent they are on the hoi polloi, and the hoi polloi don't realize how dependent they are on Wall Street. And so on. There have been numerous efforts to get everybody to understand our interdependence, but I tend to suspect the tribal nature of humanity is always going to prevent any kind of broad and deep understanding of our mutually assured dependence on each other.
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"So you end up with solid banks being forced by the Federal government to take TARP money as well as the bad ones to help cover up the state of the bad ones."I've often wondered about the veracity of that idea, that some banks were forced to take money. It would be good PR to say that, to further cloud just who was in trouble, but also to reduce the scope of the trouble by implying that not all banks were in trouble, which, I think, would have increased panic.
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That is, the idea that ALL banks were in trouble would have increased the panic.
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jnc:What drove me to distraction was the idea that the markets (and by extension the public) couldn't handle the truth about which banks had good balance sheets and which ones were screwed up. So you end up with solid banks being forced by the Federal government to take TARP money as well as the bad ones to help cover up the state of the bad ones. I agree with this.McWing:I've often wondered about the veracity of that idea…I have no particular inside info, but I think it is true.
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Scott,Fair enough, it's just that I get very suspicious of "crisis" and the idea that "the goverment should do something" about it. It often obscures the reality, purposefully I think, so that some form of increased power can be implemented without objection.
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I'm know Paulist or libertarian by any means, but very people in the country can conceptualize how powerful the Fed is. Those who understand, fall into two categories. They are either the beneficiaries of this and have no desire to explain it; or they are on the outside and wind up sounding like crackpots without credibility when they try to explain it.
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John,I probably don't understand how powerful the fed is. But I like Ron Paul, and when I hear him and the questions he's been asked in the debates, and then how he's answered, and the hostile, sometimes intentionally distorting responses he's gotten . . . I think he comes off as less of a crackpot than moderators and interviewers want him to be. And they come off as having an axe to grind against Paul (or maybe libertarians in general). I dunno. Sometimes Paul seems a little eccentric, but I've thought more than a few times that (the over-enthusiasm of some of his supporters aside), he makes a lot more sense than he's often given credit for.
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Or in other words, I'd probably give more weight to what Ron Paul has to say about the Fed than I would Geithner.
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McWing:it's just that I get very suspicious of "crisis" and the idea that "the goverment should do something" about it.I am with you, believe me. That suspicion makes me even more likely to believe that there were healthy banks able to weather the storm, but were compelled to accept "help" in order to make the government's efforts seem more necessary.
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John and MsJS thanx for the additional links.
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OT: this is acedotal of course …. Occupy DC is blocking traffic in the K-street area with the the linked arm tactic.what's interesting, beside the fact that such action was inevitable, is the reaction around the office. the partners couldn't care less and if traffic is blocked this evening they are busy making dinner arrangements and will simply wait it out. the secretaries are worried about catching their buses home. so it's leave the benz in the garage and go have a steak and martini dinner vs. "these people trapping me and keeping me from getting dinner on the table"
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Politico: Former Illinois Gov. Rod Blagojevich on Wednesday was sentenced to 14 years in prison on corruption charges that included trying to sell Barack Obama's open Senate seat. Prosecutors had asked U.S. District Judge James Zagel to put Blagojevich behind bars for 15 to 20 years following his conviction on 18 felony counts.
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If I recall correctly, he qualifies for bail pending appeal of his conviction with a 14 year sentence, but not a fifteen. Anyone here familiar with the rule?
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Speaking of Paulson style bailouts, looks like the Germans are stepping up to the plate.
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About the proposed tax on financial transactions."The Robin Hood Tax Won’t Work" http://www.cnbc.com/id/45583134 Whether you agree with him is less important than whether you understand the argument.
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"The Robin Hood Tax Won’t Work" Didn't Robin Hood rob from the treasury–i.e., the tax man–to return wealthy confiscated from peasants via taxation? Along with, of course, stealing from the wealthy class served by the Sheriff of Nottingham.
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"Didn't Robin Hood rob from the treasury–i.e., the tax man–to return wealthy confiscated from peasants via taxation? Along with, of course, stealing from the wealthy class served by the Sheriff of Nottingham."Geez Kevin, grab a clue! We all know he stole from the rich to give to the poor. Next you'll be telling us the Sarah Palin's description of Paul Revere's ride was correct!Back away from the Kook-aid.
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Oop! "kook-aid" should be "kool-aid."Though, it's kinda funny.
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"Paul Revere's ride was correct!"She was way off. "Now here's a little story I've got to tellAbout three bad brothers you know so wellIt started way back in historyWith Adrock, M.C.A., and me – Mike D."Paul Revere lyricsKook-Aid sounds like supergroup effort to raise money.
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"Whether you agree with him is less important than whether you understand the argument."I think there's a tension between constructing a transaction tax where the primary goal is raising revenue and a tax designed to "reduce market volatility" aka liquidity. I think you can put a flat tax of a couple of pennies per trade, regardless of size and raise a chunk of revenue in a relatively frictionless way, just like Ameritrade does when they charge me a commission.
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jnc:That was my point. You understand the argument
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jnc4p: i was lurking elsewhere and saw your comments re: A Christmas Carol. You, my friend, are a glutton for punishment.
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"jnc4p: i was lurking elsewhere and saw your comments re: A Christmas Carol. You, my friend, are a glutton for punishment. "I had to call it out as bullshit.
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This is good. The NYT compares their current editorial position on President Obama's speech yesterday with the position they took against the original speech by Teddy Roosevelt in Osawatomie in 1910. "2011 Versus 1910, an Editorial Change of Heart"“All these, are but the Protean forms of the essential, inherent, besetting, and obsessing idea that the Federal Government shall take control of the daily life, the earns, the property of ever American citizen.”"New York Time's editorial (09-11-1910) criticism Of Teddy Roosevelt's New Nationalism speech
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Blago will likely have to conduct his appeal from prison. Looks like he has until mid-February before he gets locked up.He's got no influential friends. Everyone wants him out of sight.
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I’m not talking about the paper’s onetime opposition to women’s suffrage, although that was strange.Seriously, why was that strange at the time? Was it unique? Did the New York Times, at the time, have a history of advocating for women's suffrage? I'm not a good person to defend the language (I mangle it often), but that just seems like an incorrect use of the word "strange", to mean "a very predictable position at the time that I nevertheless feel ashamed the paper I work for ever held". I will note, I think the Roosevelt editorial was much more compellingly written than Mr. Rosenthal's. But, then, not everything gets better with time.
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Okay, NoVA, jnc4p: where is the Christmas Carol discussion? I want to read it. I doubt I'll participate. And don't want to have to pick through everything, if it's over at Plumline, as I avoid the comments section there now on general principal. But I want to read jnc4p taking folks to school . . . 😉
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Looking for the Christmas Carol discussion. Came across this:I'm sure Conservatives find Shaq's endorsement compelling in the negative sense. One nig… I mean African nig… I mean American supporting another. Just another thug.Stuff drives me nuts. Too late to matter, I'm reporting it, anyway. That's why I gotta stay away from that place. But the idea of a Christmas Carol discussion intrigues me, and I want to see!
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KW — See Ruk at 11:52 AM EST on the "Mitts Craven equivocations" thread. And schooling is right.
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kevin:See ruk's comment at 11:52 and following thread on this post.If someone invented ruk/bernie as characters for a work of fiction, they'd be dismissed by critics as poorly conceived, one-dimensional caricatures of unthinking liberals. Truly.
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Damn you, NoVA!
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Found it. "A man morphing from a rocked ribbed conservative to a bleeding heart liberal." No. Scrooge paid for his generosity out of his own money. A bleeding heart liberal would have proposed raising taxes on everyone else to provide the Christmas turkey for the Cratchit family.Response: Plan on taking Your Money to heaven with you? And: This guy emits clichés like a flashlight emits light.And some other stuff. None of them defend the proposal that a Christmas Carol is legitimately the story of a conservative converting to liberalism, or what that implies. I suppose that is one way to look at it. But another can be that obsessiveness and social isolation are negatives, and that's it good to be taken out of your comfort zone (perhaps way out of your comfort zone). What noticeably happens to Scrooge is that he chills. He starts out angry, bitter, resentful of everybody, feeling that everybody is out to cheat him. A misanthrope of the first order. At the end, he lets go of that, finding ways to both give to and connect with the humanity around him–he doesn't simply change the locus of his anger and resentment to the Fat Cats at the Bank of England or something. It's not the story of a transferral of resentments and hatreds, but of what appears to be a strictly apolitical connecting with humanity. And, frankly, in the story almost all of his charity is local–to his friends, to those he knows, to those he's done business with. Which is, strictly speaking, a very conservative approach to charity. 😉
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25 basis points from the ECB tomorrow. Can't imagine what wold happen if they went 50.
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My problem with a certain breed of partisan. To quote the thread that initiated the Christmas Carol discussion: Would Scrooge have booed the gay serviceman who was talking from a combat zone? Cheered executions and called for the death of a man without health insurance? My fellow Republicans, who here has booed gay servicemen or cheered executions or called for the death of a man without health insurance? I haven't. I've known one conservative personally in my life who might do some of those sorts of things, maybe. But that's it. The idea that booing gay servicemen or cheering executions is somehow a fundamental part of being a Republican or a conservative, rather than something a far out on the periphery of conservatism as crapping on police cars is on the periphery of liberalism . . . I suppose it makes attempts at discussions with some people pointless. But then, I bailed on Plumline for reasons other than solidarity with lmsinca (though mostly for that).
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McWing: Sarah Palin's description of Paul Revere's ride was correctMaybe it wasn't, but you have to admit, it was awesome. The truthiness of it was delicious.
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Didn't mean to turn this into a PL thread. I just wanted to share jnc4p's good workalso: "strictly apolitical connecting with humanity" does not compute.
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KW, I hope that comment got wiped. Who wrote it – was it someone we know?
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also: "strictly apolitical connecting with humanity" does not compute.Meaning that you can be social or asocial, friendly or unfriendly, charitable or uncharitable, entirely independent of your political views.
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Mark: DDAWD. I mean, I'm sorry. But what's the point? Really?
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And, I went back to check. Comment did get wiped. The "report" button really does work, some skeptics here, take note!
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"Meaning that you can be social or asocial, friendly or unfriendly, charitable or uncharitable, entirely independent of your political views." Oh, sorry. I meant that I'm sure we've all come across people who can't/won't associate with something b/c of different political views. You should check out the Post's Date Lab feature in the weekend magazine. "I liked him, but he wasn't [preferred political orientation] and therefore un-dateable."it's become less of a problem – seems the post screens for that now.
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I have dated D women and R women, but the ones who went out with me a second time were all of a charitable disposition, obviously, regardless of their politics!
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Politics isn't everything. but for some it is. and it's tough to get past that. if everything from the clothes you where to what you eat is political, you're not going to be open to others. and you're also incredibly dull. perhaps this is a DC problem.
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As Mark observed, finding a woman of charitable disposition is much more important than which way they vote. Especially if you're going to end up living with them. 😉
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For those who doubt WaPo's "report" button…The moderators who look at every reported comment are up in Canada. There's an app that flags wirty derds for them to check out as well. They won't necessarily delete a reported comment, but they will review it.DDAWD's comment had no chance of survival.
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"Okay, NoVA, jnc4p: where is the Christmas Carol discussion? I want to read it. I doubt I'll participate. And don't want to have to pick through everything, if it's over at Plumline, as I avoid the comments section there now on general principal. But I want to read jnc4p taking folks to school . . . 😉 "You should read yesterday's back and forth over President Obama's speech. Some commentators were attempting to describe it as "nonpartisan".Also the Christmas Carol argument ended on this note from Bernie:Bernie:"Not everyone else. Everyone including self. Those who have lots (and we mean LOTS!) have the capacity to give more without real detriment to their own lives. " jnc4p: "If you only propose to raise taxes on income brackets of which you are not a member, then it's everyone else. "
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Why are the posts moderators in Canada? That's interesting. Bernie doesn't think much of other people. No doubt why he, and the rest, did not interpret Christmas Carol as being the redemption of a misanthrope, rather than a conservative (although perhaps Scrooge was more of a libertarian).
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