Monday, February 23, 2009

It's A Locke

Lots of news racing around that Obama has decided on Commerce Secretary nominee #3, former Washington Gov. Gary Locke.
Locke, 57, was the country's first Chinese-American governor, elected to lead Washington in 1996 and re-elected in 2000.

Prior to becoming governor, the Democrat served five terms in the U.S. House of Representatives and one term as executive of King County, Washington. He was chairman of the House Appropriations Committee from 1989 to 1994.

Locke's pretty well-respected and a solid progressive far. We'll see what the microscope finds on his record.

The Good Lord Helps Those Who Aren't Complete Assholes Gov. Mark Sanford (SC-Douchenozzle).

On C-SPAN’s Washington Journal this morning, Sanford received a call from a Charleston resident who said he lost his job because he has been taking care of mother and sister, both of whom have serious illnesses. The caller told Sanford he is “wrong” to decline the money. “A lot of people in South Carolina are hurting. And if this money can come and help us out we need it.” In response, Sanford could offer him only his prayers:

CALLER: I hope you all are not playing politics with this. People in South Carolina are hurting. You know how unemployment rates are high right now and going up higher. We are running out of money in the unemployment bank — we need money for that, the people that need help. And I’m one of them, I can’t get no help. […]

SANFORD: Well I’d say hello to Charleston because its home and I’d say hello to this fellow this morning and say that my prayers are going to be with him and his family because it sounds like he is in an awfully tough spot.

What a guy. Prayers! I wonder if the good Governor knows anyone who would be in a position to help that caller.

You know, like whatever Democrat the voters get to replace this jackass.

Zandar's Thought Of The Day

So, guys...really...about this whole government stake in financials thing...
American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.
Largest loss in US corporate history...$60 billion...and you and I own 80% of the company.

And this is what they want to do with all the banks?

The Village Anti-Reality Bubble

The Village? They don't exist in our dimension. (h/t Balloon Juice) The Star-Tribune on the Minnesota Senate race:
A series of court rulings have dealt the Republican long odds for overturning DFLer Al Franken's 225-vote lead. The three judges hearing the case have been only partly receptive to Coleman's bid to expand the field of ballots as he seeks more votes, and they brushed aside his claim of systemic problems with Minnesota elections.

Coleman once wanted to examine up to 11,000 rejected absentee ballots in hope that enough might eventually be opened and counted to help him overtake Franken. Now he's looking at opening perhaps a couple of thousand ballots. And the number could turn out to be even smaller.

"It's very hard, the way it's set up right now, for him to be able to win," said David Schultz, a Hamline University law professor specializing in elections.

"Very slim," was how Duke University law Prof. Guy-Uriel Charles characterized Coleman's current chances.

"Coleman is in a bubble running out of oxygen," said Lawrence Jacobs, a University of Minnesota political science professor.

Washington Post reporter Shaliegh Murray on the Minnesota Senate race:
Baltimore, Md.: Speaking of junior senators, do you see Al Franken being seated anytime before 2010?

Shailagh Murray: Perhaps, but it seems more and more likely that the Minnesota race will wind up as a re-vote. At this point it seems like the quickest way to resolve the situation.

Al Franken Revote Really?: Star Tribune just published an article on the front page which discusses Coleman's dwindling chances. The Politico last week published an article discussing Coleman's need for a miracle. Election experts from Minnesota are discussing the math which makes a Coleman comeback extremely difficult and the higher courts taking this case an unlikely prospect. How did you arrive at this recount theory? I think the only folks advocating this are a FEW Republicans who see this as Coleman's only realistic hope for overturning the results of November.

Shailagh Murray: I don't have a revote "theory." I'm just wondering how long this is going to sit in the court system. If Coleman looks desperate, why not just hold another election and beat him handily?

But there's a process in place here, and we can only assume both parties will abide by it.

So, since the Republican is going to lose a very close race, clearly we're headed towards a re-vote according to the Village. You see, it's a waste of time because the Village will never accept Franken, the Democrat, as legitimate in such a close race. Why not hold another election then?

Of course it was fine when Coleman was ahead.

It's 1994!

The logical endpoint of the Right's mass delusionary populist anti-Obama uprising is of course the ironclad belief that this imaginary uprising will mean that voters will magically vindicate them at the polls and sweep the Republicans into power in Congress in 2010.
Republicans are hatching a political comeback by dusting off a strategic playbook written nearly two decades ago.

Its themes: Unite against Democrats’ economic policy, block and counter health care reform and tar them with spending scandals.

Those represent the political trifecta that former House Speaker Newt Gingrich bet on in 1994 to produce a historic Republican takeover of Congress.

Now, some Republicans believe President Barack Obama’s one-two push on the economy and health care reform is setting the stage for a new round of significant gains, if not a total takeover.
And of course, the Village Idiots are there to help the GOP along, still believing totally that the country will have forgotten the entire Bush administration by 2010 and that the same economic plan they had that got us into this mess is the plan America wants them to use to get us out.

In other words, they're clinically insane. But watch...the Village will push the GOP Takeover Of Congress as not only possible in 2010, but that it's the expected conventional wisdom.

Moved The Decimal Point Over One

Citigroup's market cap, the total value of its common stock, is roughly $11.5 billion or so right now.

Citigroup wants the government to pay $45 billion for 40% stake for converting the stock, where a 40% stake of common stock should be worth...$4.5 billion.

So...yeah, that seems to me to be a typo of some sort. Because Citigroup can't honestly expect the government to pay $21.50 a share for a stock trading at $2.15.

Right? Because otherwise, this means either Citigroup has the worst accountants in the history of the universe and should be allowed to die, or Obama's about to pay 10x what the stock is worth and waste, oh, $40.5 billion.

Either option is, how shall I say, completetly f'ckin criminal.

As The Kroog says, just nationalize the banks already.

Conversion Convention

Building off last night's post on the government converting its stake in Citigroup from preferred to common stock as a back door for Plan N, this article in Bloomberg News takes a look at several scenarios for Plan N's implementation.
The Obama administration, which says it doesn’t want to nationalize U.S. banks, may find itself taking another step in that direction if it converts the government’s preferred shares in Citigroup Inc. into common equity to help the firm withstand losses.

Citigroup and rival Bank of America Corp., beaten down in New York trading last week on U.S.-takeover speculation, are among more than 20 lenders that could wind up majority-owned by the government if such conversions took place. Executives at New York-based Citigroup have discussed the change as a way to quell concerns about capital adequacy while heading off all-out nationalization, according to a person familiar with the matter.

U.S. regulators led by the Treasury Department announced today that the government stands ready to take bigger bank stakes in the form of shares that “would be converted only as needed over time.” To analysts including Paul Miller of Friedman, Billings, Ramsey Group Inc., nationalization of some of the nation’s largest lenders appears well under way. The government already holds $52 billion of preferred shares in Citigroup, five times the bank’s market value as of Feb. 20.

“We’re already in the nationalization phase,” Miller said today on Bloomberg Television. “We already own a chunk of Citigroup and Bank of America. The problem is that the government is dancing around this nationalization issue. They do not want to do it.”

Of course they don't want to do it. But I've been saying they have no choice now for months. So, what happens if the TARP funds Citigroup and other banks have been given were converted to common stock for the government?
The stock is more senior in the capital structure than common shares, so “loan-loss reserves and tangible common equity are the first line of defense,” he said.

If the U.S. were to convert all of its holdings into common shares, it would own more than 80 percent of the company.

Charlotte, North Carolina-based Bank of America, which has received $45 billion in TARP funds in exchange for preferred shares and warrants, would be 66 percent owned by the government if its entire stake were converted to common equity, according to data compiled by KBW Inc., a New York-based investment bank. The figure would be 69 percent at Regions Financial Corp. in Birmingham, Alabama, which has received $3.5 billion from the U.S. It would be 83 percent at Fifth Third Bancorp, the largest Ohio-based lender, which got $3.4 billion.

KBW calculated the government stakes based on a conversion price of 80 percent of the stock’s value as of Feb. 5.

Voila. Nationalization through the back door. It's going to have to be done. Looks like majority government ownership of the banks, temporary as it may be for now, is imminent.

Here's the real question: How will the government be able to re-privatize the company without annhiliating the stock price and the value of the company? It's not going to able to do so. For the most part, when the government takes over, it's going to have no choice but to break up the banks it eats.

None of these nationalized banks will survive. Assets will be sold off to those banks that are above water...the real problem is that the banks that are above water now won't be for much longer as housing prices, commercial real estate prices, and mortgage defaults continue to pile up, and the rest of the economy tanks.

It's not that some banks are good and others bad, it's that some are clearly insolvent and some haven't collapsed yet, but will over the course of the next year.

Another Milepost On The Road To Oblivion

Fannie Mae and Freddie Mac debt? No longer acceptable to Asian investors without full faith and credit guaranteed payback.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.

Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank.

“Looking at the risk, they’re not so attractive,” he said. “We need a guarantee before we’ll buy.”

You see, if the guys holding all our debt as a nation become convinced we'll never pay them back...they'll start selling off that debt. Fast. In a f'ckin tsunami. In a f'cking tsunami that will pretty much turn the dollar into a third world currency overnight.

This would be one of those Bad Things You Hear About. I expect some sort of guarantee before the end of the week on Fannie and Freddie debt.

One Bunning Bobble Too Far

Seems that KY Republican Sen. Jim Bunning's wildly inappropriate comments this weekend about predicting Supreme Court Justice Ruth Bader Ginbburg's death within nine months might have been the proverbial straw that broke the Bluegrass State GOP's back. Bunning has a long history of being a total whackjob (which is fine with the GOP) with unpredictably bad message discipline (which is not fine with the GOP.) But it seems now they want Bunning OUT.
A political bombshell this weekend from several well-placed GOP sources, in Frankfort and Washington: State senate President David Williams met with officials at the National Republican Senatorial Committee (NRSC) on Friday to discuss his interest in running for the U.S. Senate seat currently held by Jim Bunning. Williams, in town for the National Governor's Association winter meeting, impressed GOP officials, who called his interest "serious."

GOP leaders -- in Kentucky and D.C. -- continue to work fervently to nudge Bunning, who they believe is too weak to run, from the race. The NRSC recently commissioned a poll to assess Bunning's standing; sources say the numbers are brutal for the junior Senator, with his bottom line totals falling WELL-short of 50 percent (it isn't known whether Bunning has seen the complete poll tabs and, if he has, what affect it will have on his decision to run). Another recent poll, done by the liberal Web site DailyKos, was more favorable to Bunning.

Bunning's seat is being targeted by the Democrats by popular former Lt. Gov. Dan Mongiardo, among others. But a serious primary challenge from Dave Williams on the GOP side would make this seat competitive again for the Republicans. Bunning's war chest is nowhere near what it needs to be to stave off a challenge from Mongiardo, and Bunning is just nuts enough *not* to drop out in a bad situation.

But it certainly looks like Dave Williams is being set up as Plan B for the KY GOP.


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