Wednesday, February 25, 2009

Timmy's Free Cash Emporium

Timmy's boys released the details on the CAP (Capital Assistance Plan) for the banks today (h/t CalculatedRisk). The first thing on the list?
Capital provided under the CAP will be in the form of a preferred security that is convertible into common equity at a 10 percent discount to the price prevailing prior to February 9th.
Which is, you know, the date both BoA and Citi were trading at their relative peaks over the last month.

Which is, also, about 40% above what they were yesterday. Both stocks up up up after trading in the basement all morning.

That's a nice touch, Timmy.

[UPDATE] Bank stocks exploding across the board. My favorite part of the story?

The option to convert the preferred shares into common shares is a change in the rescue program designed to give financial markets greater confidence.

Common shares absorb losses before preferred shares do, which means that under a stock-conversion plan taxpayers would be on the hook if banks keep writing down billions of dollars' worth of rotten assets, such as dodgy mortgages, as many analysts expect they will.

Like I said, bend over. You just bought a financial system, and if these banks go under, we all get wiped out.

We're Losing, Double Down

Republicans: Still the party of compounding massive losses by continuing to do the same actions that got them into the mess to begin with. GOP Rule #1: When you're losing, double down on the Stupid.
Between to Monday’s Fiscal Responsibility Summit and Tuesday’s presidential address to Congress, the White House’s economic message shifted to new territory: health care.

“To my fellow budget hawks in this room and in the rest of the country, let me be very clear,” said Peter Orszag, the director of the Office of Management and Budget, at the financial summit. “Health care reform is entitlement reform. The path of fiscal responsibility must run directly through health care.”

The sudden shift took Republicans off guard. They had girded for a health care battle, but not on these terms. House Republicans have responded with a change of subject: they have proposed a “spending freeze,” a controversial idea among economists during an economic downturn. Their immediate target is the $410 omnibus spending bill that packs together nine bills, containing spending that ranges from NASA to national parks, that did not get a vote in the last Congress. It’s a double-down bet on spending austerity and opposition to “wasteful spending” as the message that can bring the party victory in the 2010 mid-term elections.

“We’re advocating that Congress freeze all federal spending immediately,” said Rep. Mike Pence (R-Ind.), the chairman of the House Republican Conference, during a Tuesday luncheon at the conservative Heritage Foundation. “People out there are hurting, and they understand what you do when times are tough. You make hard choices. Today House Republicans are urging the Democrats to do the same. We think it’s time that the Democrats put our money where their mouth is.”

Everyone! All together now...

We'd like to thank you: Herber Hoover
For really showing us the way
We'd like to thank you: Herbert Hoover
You made us what we are today

Prosperity was 'round the corner
The cozy cottage built for two
In this blue heaven
That you
Gave us

We're turning blue!
They offered us Al Smith and Hoover
We paid attention and we chose
Not only did we pay attention
We paid through the nose.

In ev'ry pt he said "a chicken"
But Herbert Hoover he forgot
Not only don't we have the chicken
We ain't got the pot!
House Republicans would like to remind you when in a recessionary scenario where the government is the consumer of last resort of in an economy based on consumer consumption, the obvious answer is clearly A GOVERNMENT SPENDING FREEZE. You know, like when your heart has stopped, the obvious answer is to shoot the EMT trying to save your life because he might give you germs when he touches you.

Yes, I'm sure a large, large sector of the American voters will be going "man if only we spent less during the recession the company would give us our old jobs back."

Jesus hell these people are idiots.

Wall Street Stupidibubble(tm)

So, like I said, 92% of America liked Obama's speech according to CNN. So what's the headlines coming off of Wall Street today?

"Stocks fall as Obama fails to deliver details"


The Great Plan N Debate

Last night on Lehrer, The Kroog took on former FDIC Bill Isaac on the Plan N debate. Highlights:
KRUGMAN: And let me just say one important thing, that we do -- you know, we nationalize two banks a week. The Federal Deposit Insurance Corporation takes over temporarily two banks a week on average because of problems with the banks. This is not something that is qualitatively different from what we do all the time. It would be quantitatively different, because we don't take over trillion-dollar banks every week, but these are -- you know, this is something we do, do all the time.
Which is the point. The banks are insolvent. If they weren't insolvent, they wouldn't need hundreds of billions of dollars and trillions in loan guarantees. It's self-evident, guys. We're throwing more money at the banks than the banks themselves are worth. That means their asses are broke. On the other hand, we have people saying silly things like this, from former FDIC chairman Bill Issac:
ISAAC: And they're terribly complex. I don't know who would run them. I don't know who's going to buy them once the government decides to divest them. And they're definitely going to shrink, if they are nationalized. The markets won't support them.

And so you're talking about shrinking maybe two-thirds of the banking system in half? That's exactly the wrong medicine in the economy we're in today. We need our banks to grow; we need our banks to start lending money. And that's not going to happen if we nationalize them.

And the other thing, Judy, I would tell you is we're not going to be able to stop at a bank or two. The SEC is still not regulating the short-sellers, and they're going to attack one bank, until they score some kind of a victory and get the stock down to zero, and then they're going to attack the next one and the next one and the next one.

The banks won't grow if we nationalize them. They have lost 95%, 97%, 99% of their market value, but the fear is they won't grow if nationalized? They've taken terrible losses from bad, bad investments made with assets they didn't actually have.

He's right about the markets not supporting the banks however. When all is said and done, there will be a lot fewer banks out there in America and the world. A lot of the financial sector itself will have to go, and those jobs aren't coming back. Branches are going to close, banks are going to get swallowed up, assets sold to larger companies and debts...well now, that's the real problem, isn't it?

Somebody has to pay for these debts, trillions of dollars in deleveraging mess here. Somebody's picking up the tab for these bank debts. No matter who does, the debts are going to crush the economy.

Home, Home I'm Deranged

Home sales in January took another nasty drop to a 12-year low. There are still way too many unsold homes on the market, and people are waiting for the price to keep dropping before they buy, leading to more unsold homes on the market, leading to lower home prices, etc, etc, etc, death spiral kaboom.

Bibi Makes A Hard Right

Unable to secure the centrist Kadima and Labor party folks for his coalition government, Benjamin Netanyahu quest to become Israel's next PM turns to the country's right-wing to form a hard-line government.
Netanyahu, who has said he wants to shift the focus of Palestinian statehood talks from territorial to economic issues, was chosen on Friday by President Shimon Peres to try to form a government and become prime minister for the second time.

Likud negotiators met officials of the ultranationalist Yisrael Beiteinu party of Avigdor Lieberman and other right-wing factions later near Tel Aviv on terms for political partnership in a governing coalition.

A spokeswoman for Lieberman said he would push to secure either the defense, finance or foreign affairs portfolio for himself. She said the party also wants the justice and internal security portfolios.

Now, here's the real problem. Avigdor Lieberman makes America's right-wing Republican nutbars look sane by comparison. He makes Michele Bachmann look like Dennis Kucinich by comparison. Giving this party control of Israel's defense, justice, and internal security ministries is f'ckin scary.
Yisrael Beiteinu, which came in third after the centrist Kadima party and the Likud in a February 10 election, opposes Israeli withdrawal from the occupied West Bank.

It advocates trading land in Israel where Arab citizens live for Jewish settlements in the West Bank in any peace deal with Palestinians and calls for all Israelis to take an oath of loyalty to the Jewish state.

A narrow right-wing government and a prominent role for Lieberman could put Netanyahu on a collision course with Washington, where the Obama administration has pledged swift pursuit of an Israeli-Palestinian peace deal.

Likud spokeswoman Dina Libster denied Israeli media reports that Netanyahu had ruled out appointing Lieberman as defense minister and would offer him either the finance or foreign affairs portfolios.

This guy as foreign minister would be a disaster too.

More and more it's looking like Obama's going to have a serious Israel problem on his plate, and soon.

Obama Delivers, Jindal Quivers

CNN's polls on America's reactions to Obama's address to Congress showed Obama absolutely belted out a grand slam.
Sixty-eight percent of speech-watchers questioned in a CNN/Opinion Research Corp. survey had a very positive reaction, with 24 percent indicating that they had a somewhat positive response and 8 percent indicating that they had a negative reaction.

Eighty-five percent of those polled said the president's speech made them more optimistic about the direction of the country over the next few years, with 11 percent indicating the speech made them more pessimistic.

Eighty-two percent of speech-watchers said they support the economic plan Obama outlined in his prime time address, with 17 percent opposing the proposal.

But...wasn't Obama in trouble, blah blah blah. He pretty much crushed it out of the park, and the American people love the guy right now. Numbers in the eighties mean even Republican voters...hard core Republican voters...thought Obama gave a good speech, and that they support his efforts to do something about this economy. 82% is five out of six, and that means even the GOP is sick of the GOP.

Watching the speech on MSNBC last night, the approval meter ratings for Obama's speech among McCain voters was pegged all the way positive for most of the night. America is behind our President not because it's mandated by the Village, but because they actually believe in the guy. That's the kind of President we need right now.

Bobby Jindal, on the other hand...well, even Fox News was dumping on the guy.

Lousiana Gov. Bobby Jindal’s (R) response to President Obama’s speech tonight received a universal thumbs down from the Fox News panelists, who are traditionally conservatives’ most gentle critics:

BRIT HUME: “The speech read a lot better than it sounded. This was not Bobby Jindal’s greatest oratorical moment.”

NINA EASTON: “The delivery was not exactly terrific.”

CHARLES KRAUTHAMMER: “Jindal didn’t have a chance. He follows Obama, who in making speeches, is in a league of his own. He’s in a Reagan-esque league. … [Jindal] tried the best he could.”

JUAN WILLIAMS: “It came off as amateurish, and even the tempo in which he spoke was sing-songy. He was telling stories that seemed very simplistic and almost childish.”

That's not good news for the 2012 hopeful. His "coming out party" was instead a "deer in the headlights" moment.
On PBS, New York Times columnist David Brooks also remarked, “In a moment when only the federal government is actually big enough to do stuff, to just ignore all that and just say ‘government is the problem, corruption, earmarks, wasteful spending,’ it’s just a form of nihilism. It’s just not where the country is, it’s not where the future of the country is.”
Nihilism! For once, David Brooks is absolutely right (Whoa, dodge that lightning bolt from above there.)

The GOP isn't just the Party of No. They are the Party of Nothing. Nothing the government can do, nothing but the same actions that got us into this mess, nothing but tax cuts as the answer to everything, nothing but obstructionism on whatever Obama and the country want to do, nothing but jingoistic empty responses, nothing but outright Hooverism when the country needs a strong and bold plan. Nihilism indeed.

Jindal fell flat on his face to most of us. To the wingers, he fell on his face because he wasn't angry, hateful, and obstructionist enough. His 2012 aspirations just got craphammered. Once again, Sarah Palin is winning by virtue of keeping her mouth shut.

Jim Bunning Pitches A Fit

The saga of my state's junior senator, Jim Bunning (R-Nutbar) continues. After the weekend's ghoulish remarks on Justice Ginsberg's pancreatic cancer and news that the KY GOP is looking for a replacement for him in the primary, it seems Jimbo is threatening to sue. Sue the Republican Party, that is.
But really, what could be less frivolous than a little old-fashioned infighting? On Tuesday, Senator Jim Bunning threatened to sue fellow Republicans if they do not support his bid for reelection in 2010.

Bunning's threat was leveled after rumors that the National Republican Senatorial Committee was courting David Williams, president of the Kentucky State Senate, to take a shot at the incumbent senator's seat.

"Support of incumbents is the only reason for (the NRSC's) existence," Bunning said. "So if they recruited someone and supported them in a primary against me, I would be able to sue them because they’re not following their bylaws."

"Just to clear up any potential confusion, the NRSC supports Sen. Bunning," Sen. John Cornyn (R-TX), chairman of the NRSC, told Kentucky's Courier-Journal.

The Texan called it a "misunderstanding," though Bunning was much more terse.

"I don’t believe anything John Cornyn says," the senator told the Courier-Journal. "I’ve had miscommunications with John Cornyn from, I guess, the first week of this current session of the Senate. He either doesn’t understand English or he doesn’t understand direct: ‘I’m going to run,’ which I said to him in the cloakroom of our chamber."
Bunning is a complete crackpot, and the more he stomps around like a screaming child denied ice cream, the more it looks like the Dems have a shot at his seat (especially with increasingly popular Gov. Steve Beshear in Frankfort.)

The more divided state and national GOP election officials are over Bunning, the more uncoordinated his campaign looks. The Dems can counter-attack hard and take this seat in 2010.


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