Morning Report – all about the FOMC minutes this week.10/6/13

Markets are higher on election results in Brazil, which is putting a bid under emerging markets. Bonds and MBS are down small.

This week has very little economic data to worry about (typical for the week after the jobs report). The most important event will be the FOMC minutes on Wednesday.

The banking system is loading up on Treasuries. They have all this cash that they are not putting to work. Of course all of the lawsuits and buyback demands isn’t helping things. Another interesting data point – S&P 500 companies are spending 95% of their profits on buybacks. This speaks to the lack of investment opportunities that companies see. It is the quintessential vote of economic pessimism.

A marriage of right and left – a new 15 year mortgage that uses the downpayment to buy down the rate closer to zero. A pilot program is already up and running. Interesting idea.

Last week’s decision on Fannie and Fred left investors with a bruising. The plaintiffs vow to continue the fight, however understand that Fannie and Fred common stock is a litigation lottery ticket. The only way it is worth any money is if a court overturns the legislation forming the FHFA.

18 Responses

  1. Wall Street sharpies did it. That is the beginning and the end of the Left’s “analysis” of the housing bubble.


  2. Well fuck. Now what?

    Earth’s cold deep ocean has not warmed measurably since 2005, says NASA. It may have cooled.


  3. Prolly just a one-off.

    “This is a case where a patient went in for a simple vascular surgery on his left leg and came out with an amputated right foot and scrotum.”


  4. Dueling takes on the AIG trial.

    Andrew Ross Sorkin defends the government’s decisions:

    “A.I.G. Bailout, Revisionists’ Version
    By Andrew Ross Sorkin
    October 6, 2014 9:15 pm”

    David Dayen notes all the new information coming out as a result of the discovery and how it changes the conventional narrative:

    “Secrets of the bailout, exposed: Why you should be watching the AIG trial
    David Dayen
    Tuesday, Oct 7, 2014 10:58 AM UTC”

    & also Yves Smith

    “AIG Bailout Trial Bombshell I: Paulson Rejected Chinese Offer to Invest “More Than the Total Amount of Money Required”
    Posted on October 6, 2014 by Yves Smith”


    • McWing:

      Customers or products?

      I read this earlier this morning, and that was precisely the line that jumped out at me. I think it should be the quote of the day:

      For anyone afraid of clicking on McWing’s links….

      Locking children up for the largest part of the day, in a dreary room with 20 to 30 other children all born within nine or ten months of each other, is a model that make sense — that is something other than insane — only if you think of children as batches — if you believe, as our president and those who share his views believe, that the children are the government schools’ product rather than their customers.


      • Scott, for you and JNC –

        On statutory interpretation:

        This wil be my only contrib until tomorrow night – on my way to a funeral in Bucks County, PA.


        • Mark:

          On statutory interpretation

          Thanks for the link. I’m not all that impressed with Stevens, especially his discussion of Scalia. It’s a pretty feeble critique, if you ask me. A lot of what he says is either highly questionable or obviously wrong. For example, after pointing out that Katzman lists 4 specific textualist critiques of using legislative history (attributing them to Scalia), Stevens essentially dismisses 3 of them out of hand with barely a consideration. For one of them he says:

          Similarly, it seems to me that a prediction that a judicial refusal to consult legislative history would improve the quality of legislative draftsmanship is not only incorrect, but actually disrespectful to the professionals employed by a coequal branch of our government.

          Apart from Stevens’ “respect” for his “coequal” professionals of the legislative branch, which is touching, I suppose, but hardly relevant to the question at hand, we are left simply with Stevens’ say-so that the claim is “incorrect”. Hardly the makings of a convincing argument.

          He goes on to say:

          Moreover, the argument that giving weight to legislative history enhances a judge’s ability to impose her views on the law is simply wrong; a duty to consider more guideposts rather than less constrains rather than enlarges the judge’s discretion.

          His metaphor of “guideposts” only works to do what he says if each guidepost points in the exact same direction, some with more specificity than others. But of course they don’t all point in the same direction, thus increasing the need for discretion as to which direction to go. And even when the legislative history does point in a more narrow direction, as with the the case that Katzman used to frame the differences between the textualists and purposivists (I tihnk that is the right term for them), Church of Holy Trinity v. United States, it still introduces the need for more, not less discretion. In that case the law itself referred only to someone who “performed labor or service of any kind,” but according to Stevens the legislative history made it plain that what was really intended was manual labor, not labor of any kind. Ok, fine, but then what exactly constitutes manual labor? Does the legislative history really speak to all forms of labor and which qualifies as manual labor? What about, say, the foreman of a construction company. Is he performing manual labor if what he is doing is organizing and managing a construction crew? Even while narrowing the application of the law, the use of legislative history introduces the need for wider discretion from the judge. On this it is Stevens, not Scalia, who is “simply wrong”.


        • Scott, I think there are numerous statutes that are plain on their face, but so many have junk written into them because of “compromises”. I think NoVa can attest to this. Where the judges are “reaching” is when they use one legislator’s public statement or quote in the record as guidance. But where there is a clear committee statement endorsed by both parties and the leadership [this is often the case, even today] then I think the Court would be disrespectful of the process if it ignored that history to impose its own “interpretation”. As a practical matter, there is no tax lawyer on the Supremes and they get completely lost in the IRC. That is one statute where they truly need to look at the committee statements.



        • Mark:

          But where there is a clear committee statement endorsed by both parties and the leadership [this is often the case, even today] then I think the Court would be disrespectful of the process if it ignored that history to impose its own “interpretation”.

          I lean towards Scalia…neither committees nor leadership pass laws. Congress does. And the argument isn’t that Court should impose its own interpretation. It is that Congress should leave the junk out, and the Court should read the law for what it says. If the law doesn’t say what Congress means, then it should re-write it.

          BTW, the fact that compromises might result in a law being filled with “junk” that makes the meaning of the law unclear is itself evidence that the intent of this or that member, or even the committee, can’t be read to be the intent of congress as a whole.

          As a practical matter, there is no tax lawyer on the Supremes and they get completely lost in the IRC.

          All the more reason for the abolishment of the IRC and the implementation of a simple, straight forward and equitable tax system that doesn’t require a tax lawyer to understand and interpret it.

          That is one statute where they truly need to look at the committee statements.

          What is the point of having written law if it is something else, like committee statements, that dictate what the law actually is? If a committee statement can make intent clear, why can’t the written law itself do so?


        • BTW, Mark, it’s just occurred to me that if the Supremes are incapable of reading and understanding the IRC without the aid of a tax lawyer, then it is a dead on certainty that most of the Congress which voted on it can’t either. What does that tell you about the legitimacy of the IRC?


        • it is a dead on certainty that most of the Congress which voted on it can’t either.

          Rings true for me.

          However, the committees are [supposed to be and used to be] peopled with relative expertise in their committee function. Sensenbrenner [R – WI] strikes me as one of those.

          NoVa, have you had dealings with him?


  5. Like

  6. look — all that is fine. do what you want and complain about other dudes if that’s your move. i get it. i think it’s a losing strategy, but that’s not my call. and you can’t have 750 ways to say it. too big of a playbook.

    but leave craft beer out of it.


  7. I assume that’s a fake magazine as a joke. My first response to McWing’s question is why would you want to in the first place?


  8. Secret Law isn’t just for the NSA.

    “During more than six hours of testimony, Mr. Geithner’s was not the only book introduced. The other volume was the secretive compilation of the Federal Reserve’s legal powers, known internally at the central bank as the “Doomsday Book,” which has never been made public.

    When Mr. Boies moved to introduce two of the editions of the book into evidence, the New York Fed’s own lawyer, John Kiernan, sprang up from the gallery to chime in: The Fed wanted the “Doomsday Book” kept strictly under seal.

    Judge Wheeler determined he would let the editions into evidence under a temporary seal, until a hearing to determine whether they should stay that way. ”


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