Wednesday, July 15, 2009

GNCV: The Return Of Deal Or No Deal - UPDATE

Breaking news at this hour:

CIT Group, the commercial financial lender I discussed this morning after last night's news the company was working a bailout deal with the government, has seen their deal fall apart.

CIT Group, a major lender to small- and mid-sized U.S. businesses, said on Wednesday that talks with the government to bail out the company had ended, a development that could make bankruptcy likely.

"Discussions with government agencies have ceased,'' the New York-based company said in a statement. "There is no appreciable likelihood of additional government support being provided over the near term.''

The announcement came after last-ditch talks in which Treasury Department had been concerned about a worsening liquidity crunch at CIT over the last few days, and that government aid would not put the lender on a path to recovery.

CIT said its management, directors and advisers were evaluating alternatives. It did not elaborate.

A bankruptcy filing would mark one of the largest for a U.S. company since the global credit crisis accelerated last September.

Trading in CIT shares was halted on Wednesday afternoon, with the shares last trading at $1.65, up 4 cents.

Treasury had been considering an aid package that included a temporary loan to give CIT room to strengthen its balance sheet by raising additional capital through debt or equity, a person familiar with the matter had said.

Failure to reach an agreement could result in a bankruptcy, the person said. The person requested anonymity because the talks were private. Other options discussed had been access to the U.S. Federal Reserve's discount window, as well as asset transfers.

Has Obama drawn the line at bailing out any more financial institutions? The rise or ruin of CIT was Obama's first real test of his reaction to Too Big To Fail. Is he finally saying "enough is enough?" Is this some sort of break-neck paced negotiation ploy? Or is CIT Group just too small of a political and financial player for Obama to stick his neck out?

There's no hiding the fact that Obama's numbers are slipping. His approval rating average has dropped from a spread of more than +40% in February (roughly 65% approval - 25% disapproval) to +18.5% now (56% - 37.5%). The political climate has certainly changed. Republicans can't complain too loudly about Obama letting CIT go under, too...not with all the attacks they've made on him spending taxpayer money on private companies.

Still, this is surprising. I honestly figured we'd be seeing another $10 billion or so loan from Treasury. If talks have broken down and CIT is heading for the scrap heap, then I say "good riddance."

We'll see how this shakes out.

[UPDATE 10:05 PM] Financial Times has an interesting article on CIT as well.

The failure of regulators to agree on a last-minute rescue package for the 101-year-old company might starve a large chunk of corporate America of much-needed capital and hit the economy at a time when the recovery appears to be faltering.

In-fighting between the Federal Deposit Insurance Corporation, the Federal Reserve and the Treasury seemed to have killed hopes that CIT would secure a government lifeline.

“They did what everyone else did, but did not get what others got,” said one adviser to CIT, noting that in spite of receiving $2.3bn in bail-out funds and permission to convert into a bank holding company, CIT was denied access to debt guaranteed by the government.

CIT, which has a balance sheet of about $80bn, on Wednesday said it was “evaluating alternatives”, but there is scant hope that any buyers would emerge for the company amid serious concerns over its business model and the quality of its assets.

"In-fighting?" I wonder, who put their foot down and said no to CIT? Could it have been FDIC head Sheila Bair? A couple of weeks ago she came out with a strong statement against the doctrine of Too Big To Fail. I said then that deeds, not words, were what mattered. Could this have been the first deed? Did Bair object enough to kill any deal with CIT?

There's a story here...a potentially huge one. If the government scuttled the CIT deal, specifically Sheila Bair, that could mean that Obama has her back, and that the era of Too Big To Fail might be finally coming to an end.

But I doubt it. Until I hear otherwise, I'm going to chalk this up to "the financial lobby decided to throw CIT under the bus." After all, look how well Goldman Sachs is doing without as much competition as they had just 18 months ago.

Trickle-Down Obamacare

Wow. This may be the silliest argument against Obamacare I've seen in quite some time...and from a doctor, to boot.
But what is health care? The concept of reimbursable health-care service rests on the premise that the medical problem in need of servicing is the result of involuntary, unwanted happenings, not the result of voluntary, goal-directed behavior. Leukemia, lupus, prostate cancer, and many infectious diseases are unwanted happenings. Are we going to count obesity, smoking, depression and schizophrenia as the same kinds of diseases?
Actually, that's kind of the point of Obamacare, working to lower these behaviors in the populace in order to lower costs, but moving on...
Many Americans would willingly pay for insurance to protect them against the exorbitant cost of treating their own leukemia. But how many Americans would willingly pay for insurance to protect them from the expenses of treating their own depression?
Don't feel that's relevant to the question, but okay.
Everyone recognizes that the more fully we wish insurance companies to defray our out of pocket expenses for our car repairs, the higher the premium they will charge for the policy. Yet foregoing reimbursement for trivial or unnecessary health-care costs in return for a more suitable health-care policy is an option unavailable under the present system. Everyone with health insurance is compelled to protect himself from risks, such as alcoholism and erectile dysfunction, that he would willingly shoulder in exchange for a lower premium.
Still kind of an odd argument, but continue...
The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health. The first requirement for better health care for all is not equal health care for everyone but educational and economic advancement for everyone.
Holy Schnikes. So, right off the bat this guy under the Hippocratic Oath admits the fatal flaw in our current program (cost as a barrier/rationing criteria to care) and calls universal care a delusion, and then he says "Oh, the non-delusional way to fix this is to make everybody rich."

And this guy's a psychiatrist.


In Which I Call Shenanigans On Andy McCarthy

McCarthy, on Obama throwing out the first pitch at the All-Star Game last night:
Though it's not a widely appreciated fact, we right-winger sports nuts have long known that the sports press is among the media's leftiest precincts. So I suppose we shouldn't be surprised at how little was said (as in nothing at all) about the reception President Obama received last night when he came out on the field to throw out the ceremonial first pitch at the baseball all-star game in St. Louis. It was a packed house (over 50,000 in attendance), and the jeers were easily discernible.

Don't get me wrong: There was more cheering than booing. But that's to be expected: It was a festive national occasion, and most of us who disagree intensely with Obama's policies would be more apt to stand and cheer our president respectfully. That's what made the booing all the more noticeable to anyone — other than a sports journalist — who heard it.

That's the most disingenous, self-serving sack of crap I've read all week. Acting all shocked that the Right would be full of disrespect for this President? Please. Yeah, Bush got booed. A lot. All the damn time. Maybe McCarthy didn't hear that. Being Preaident doesn't insulate one from jeers...that is unless like Bush, you put up Free Speech Zones and kick out all the folks who don't like you out of the public event.

Sotomayor Hearings, Day 3

Starts here...

... And gets worse from there for the GOP. Doesn't help that GOP issues groups are basically calling Sotomayor a terrorist.

In the spot, Sotomayor is compared to conservative bogeyman Bill Ayers, and is alleged to have "led a group supporting violent, Puerto Rican terrorists." Sotomayor was a Puerto Rican Legal Defense and Education Fund board member, and from there, I suppose, it's only a hop, skip, and a jump to leading a support group for terrorists. Early last month, Levey said he "underestimated the degree to which a few conservatives would say a few extreme things, and that would be characterized as what all conservatives think."
Keep it up. I'm sure the Democrats will enjoy those extra couple million Latino votes. After all, Republicans like Pat Buchanan already see Latinos as the enemy anyway, so why not unload on them?

In 2008, Hispanics, according to the latest figures, were 7.4 percent of the total vote. White folks were 74 percent, 10 times as large. Adding just 1 percent to the white vote is thus the same as adding 10 percent to the candidate’s Hispanic vote.

If John McCain, instead of getting 55 percent of the white vote, got the 58 percent George W. Bush got in 2004, that would have had the same impact as lifting his share of the Hispanic vote from 32 percent to 62 percent.

After all, it's not like the GOP needs to worry about the Latino vote if they are busy trying to assume all Latinos have to prove their citizenship first before voting. That way, they can just classify all of them as "provisional ballots".

Public Option, Private Choice, Public Nuisance

While I called this last week that the issue of the public option including funding for abortions would be a dealbreaker for conservatives, I'm actually completely unimpressed that the loudest voice crying out on abortion here is...surprise!...good ol Bachmanniac.
At this point, there are at least 30 House members -- from both parties -- who have vowed to oppose health care reform unless the legislation specifically excluded funds that might pay for abortions. Roll Call reported:

Abortion foes say draft versions of the House health care bill allow for the possibility that the Health Benefits Advisory Committee will recommend that abortion services be included as part of a benefits package. Unless the bill has a clear exclusion, they say, abortion could be included in a government-subsidized health care plan. [...]

Rep. Joe Pitts (R-Pa.), chairman of the House Values Action Team, on Tuesday hosted a press event with 11 Republicans concerned that the bill would allow publicly funded abortions and create a mandate that would force private insurers to cover abortion.

At the press conference, Rep. Michele Bachmann (R-Minn.) said health care reform inevitably mean that "new abortion clinics would have to be built all across America."

To be honest, this group of Republicans and Blue Dog Dems would have bailed on the AHCA anyway. The question is, how many? If enough Blue Dogs (and let's face it, all the Republicans will vote no) bail on the bill, they can block it.

We'll see where this goes.

The Village Warning Bells Are Ringing

Expanding on my posts this week that the Village is warning that the price of Eric Holder's investigations into unfinished Bush business will be the death of Obamacare, the Double G looks at a conversation on yesterday's Morning Joe with NBC White House correspondent Chuck Todd about Holder's possible investigation. Todd's responses are very, very telling as to how the Village mindset works:
Todd: Look, let's take all of these stories in one big thing: really, the only important thing -- the most important thing -- the President has to focus on is getting the public's trust on the economy, and pushing health care. Cheney, the CIA, and in some respects Sotomayor are cable catnip --

Brzezinski: Yep.

Todd: It's news catnip - but they're sort of clouding the two most important issues the President's got to get his arms around this week: winning back trust of the middle on the economy and pushing health care through.

And of course it would be a darn shame if anything "clouded" the "middle's" opinion of the President on the economy and Obamacare. That, in Chuck Todd's opinion, would be a grave mistake. What centrists think about Obama on the economy and his health care plan are the things Obama should be worrying about...not this silly investigation. After all, Centrists run Chuck Todd's world.
Todd: And I think that's why, in the President's gut, he doesn't want to do this. They've made that clear they don't want to do this. I think that's what you see a lot of the West Wing -- they don't want to get into this because of what you're saying.

Ultimately, a lawyer gets paid to not tell you what the law is -- but to interpret the law, to tell you how far you can push things until you cross a line that a judge will say is illegal. That's what lawyers get paid to do: they get paid to interpret the law, and interpret the law in a way that allows you to stretch things.

You are on a slippery slope - this is a very dangerous aspect to go after, because these CIA guys will say, as you said Pat, we got the letter from these lawyers in the Bush Justice Department that said we can do this. You can't suddenly change the law retroactively because there's another interpretation of this. I'm sure there are a legal minds that will fight and say I don't know what I'm talking about, but it seems to me that's a legal and a political slippery slope.

I've made my "Obama as Dubya" comparison on a number of occasions, but not when Obama is actually trying to address civil liberties issues. But Chuck Todd is assuming the Obama White House works exactly like the Bush one did, and isn't even bothering to pretend otherwise. Look at the warnings he is delivering here:

  • Satisfying the centrists is the most important thing.
  • Obama is risking health care otherwise.
  • Going after the CIA is dangerous.
  • Obama is on a slippery legal slope.
I had no idea Chuck Todd was working for Karl Rove, but there you go. The guy is spouting the GOP talking points from April on this issue. Double G concludes:
That's now completely reversed. It's the establishment press that stands most stalwart against investigations. They believe, as Richard Cohen so memorably put it when railing against the Lewis Libby conviction, that "it is often best to keep the lights off." Few things explain better what has happened to our political class than the fact that (with some important exceptions) it is establishment journalists who are the most aggressive opponents of investigations of high-level government lawbreaking. Trying to prevent investigations of their friends, colleagues and bosses in political power is one of the few times they're willing so explicitly to turn themselves into advocates, as Chuck Todd did here.

[UPDATE 1:06 PM] Chuck Todd apparently reads Double G and realized he's been called out. He'll be doing a podcast with Glenn Greenwald later today.

AHCA: The Morning After

With a night to read the America's Health Choice Act, the reaction is mostly as expected. Progressives are truly excited, while the best conservatives can do is warn that the program is heavily backloaded, costing the most between 2014-2019 (which is true.)

But it's the surtax on the wealthiest 1.2% of Americans that is bringing out the long knives. Leading the charge against, The Village, starting with the Washington Post:
Mr. Obama praised the House bill yesterday without addressing the surtax. A far better way to pay for health care would be to end the tax break for employer-provided health benefits, a subsidy that not only artificially pumps up demand for expensive treatments but also disproportionately benefits upper-income earners. Eliminating or, at least, capping it would be good health-care policy as well as good tax and budget policy. Pretending that "the rich" alone can fund government, let alone the kind of activist government that the president and Congress envision, is bad policy any way you look at it.
Which makes even less sense, ending the tax break on employer-provided health benefits would of course have employers not have employer health benefits, driving everyone to the public option and leaving nobody behind to pay for it.

The WSJ screams it would destroy American employers.
Under the House measure, employers with payrolls exceeding $400,000 a year would have to provide health insurance or pay the 8% penalty. Employers with payrolls between $250,000 and $400,000 a year would pay a smaller penalty, and those less than $250,000 would be exempt. Certain small firms would get tax credits to help buy coverage.

The relatively low thresholds for penalties triggered the sharpest criticism yet from employer groups, who said the burden on small business is too high and doesn't do enough to help them expand insurance coverage.

"This bill costs too much, it covers too few and it has way too much government involvement," said Michelle Dimarob, a lobbyist with the National Federation of Independent Business, the main trade group for small firms. "Small business doesn't want any of those things."

According to 2006 data from the federation, businesses with between five and nine workers, representing about one million employers, had an average payroll of around $375,000 a year. A report from the Kaiser Family Foundation found that only about half of firms with three to nine workers offered health benefits in 2008.

In other words, this would force small businesses to sign up for, well, something or pay fines. But it's far more intersting to note that these smaller busnesses with 7.5 million employees or so, only half of them are even offered health coverage. How does this "cover too few" when small businesses already skimp on the health insurance because the cost is right now too high? Wouldn't businesses in this category be the most obvious group to benefit from a robust public option?

And it looks like Obama's finally getting rid of the fantasy of a "bipartisan" health care bill.

President Barack Obama may rely only on Democrats to push health-care legislation through the U.S. Congress if Republican opposition doesn’t yield soon, two of the president’s top advisers said.

“Ultimately, this is not about a process, it’s about results,” David Axelrod, Obama’s senior political strategist, said during an interview in his White House office. “If we’re going to get this thing done, obviously time is a-wasting.”

Both Axelrod and White House Chief of Staff Rahm Emanuel said taking a partisan route to enacting major health-care legislation isn’t the president’s preferred choice. Yet in separate interviews, each man left that option open.

“We’d like to do it with the votes of members of both parties,” Axelrod said. “But the worst result would be to not get health-care reform done.”

Good. As I've said on numerous oocasions, the GOP has to kill this bill or they're done in this country for a generation, the way they were all but buried after Social Security and the New Deal were passed. They have to block it, and they've got the health care industry and the Village on their side too.

The battle is truly on. The reformers aren't lying down, either as Steve Benen notes:

In what I believe is the OFA's first television ad, "It's Time" will run on cable over the next two weeks -- the time period between now and the August recess -- as well as local stations in Arkansas, Florida, Indiana, Louisiana, Maine, Nebraska, North Dakota, Ohio, and Washington, D.C., calling on policymakers to support reform.

I'm going to go out on a limb and guess that these states were not chosen at random. The ad might as well begin, "Dear Sens. Lincoln, Martinez, Bayh, Landrieu, Nelson, Snowe, Collins, Conrad, and Voinovich...."

The ad is obviously going with an emotional pitch, highlighting the plight of five regular Americans, each of whom were among hundreds of thousands of people who shared their stories with OFA. There's a mom whose four year old son has cerebral palsy and epilepsy. She has insurance, but the co-pays, durable medical expenses and other out-of-pocket costs are just brutal for her family's finances. There's the healthy young woman whose employer doesn't offer insurance, so she bought her own. When she was diagnosed with low blood pressure, her monthly premium jumped more than 50 percent, forcing her to move in with friends when she had to decide between insurance and rent.

Each of the people featured in the ad insist that "it's time" to finally reform the system. They're right, and it's good to see that the OFA has the resources to put an ad like this on the air.

And finally, the Senate is moving on health care as Teddy Kennedy's committee passed its version of the Senate HELP bill.

Things are going to move fast in July. They will have to.

The Dreaded Liberal Media

Next time you hear folks trot out the tired old "librul media" garbage, remember the Gov. Mark Sanford story.
National media blitzed Gov. Mark Sanford’s staff, offering big ratings and, possibly, a sympathetic venue in an effort to land the first interview with the governor after his six-day trip to Argentina.

In addition, a blogger and state leaders reached out to Sanford’s office to try to coordinate a way to “push back” on the growing mystery surrounding Sanford’s absence.

The behind-the-scenes maneuvering is detailed in e-mails released by the governor’s office this week in response to The State’s request under the freedom of information act.

The e-mails show some outlets promised Sanford “friendly ground,” while others objected to early reports that questioned his disappearance.

“If you all want to speak on this publicly, you’re welcome to Washington Times Radio,” wrote staffer Joseph Deoudes to Sanford spokesman Joel Sawyer on June 23. “You know that you will be on friendly ground here!”

It's amazing, but in no way surprising, the number of outlets of our "librul media" that crawled on their hands and knees, offering Sanford's office the chance to spin their side of the story.

And they did. Remember the lies that Sanford was hiking along the Appalachian Trail? Ahh, but it gets worse:

“The Governor can have the floor for 10 minutes and reach over a million people on the show tomorrow!!” wrote WACH morning anchor Tim Miller on June 23. “I’ve already have calls from others who want to bash. ... I’m not doing that!”

Miller, a former chairman of the Lexington County Republican Party, said his channel’s three-hour morning show provided Sanford an open mike, of sorts, to explain himself.

“We’re not taking sides,” Miller said. “We’d ask some questions. There would be no hidden agenda.”

Another reporter, Griff Jenkins of Fox News, invited Sanford on to set the record straight.

“Having known the Governor for years and even worked with him when he would host radio shows for me,” Jenkins wrote to Sawyer on June 23, “I find the story and the media frenzy surrounding it to be absolutely ridiculous!”

Of coooooourse it was ridiculous. FOX News was going to "set the story straight", and later did that day...playing the whole Appalachian Trail lie to America verbatim from Sanford's office of spin.

And of course the Winger bloggers wanted to help Sanford's office kill the whole thing:

If he wants something more personal for the blog to push back, I’m happy to help,” wrote Erick Erickson, a writer for On June 23, Erickson ripped “media speculation” about Sanford’s whereabouts.

I wasn’t trying to be a reporter. I wanted to curtail the story,” Erickson said by e-mail. “Well that didn’t work.”

Nice. And don't think it was just bloggers like Erickson trying to bury criticism of the obvious lie out of Sanford's office.
ABC News White House reporter Jake Tapper e-mailed Sawyer twice on June 23, both to note coverage of competitor NBC.

With a subject line of “NBC spot was slimy,” Tapper e-mailed Sawyer a “Today” show transcript of Sanford coverage, calling it “insulting.” Later, Tapper forwarded Sawyer a Twitter post by “Meet The Press” host David Gregory.

Jeff Schneider, a vice president at ABC News, said Tapper was “carrying some water for producers who knew he had a relationship with the governor’s office.”

Of course he was. That's the way this game works. Our "Obama obsessed" media may be, well, obsessed, but it's not obsessed with helping the President or his party. After all, the other side needs the most help, and will of course, be far more grateful in return...

Just another day in the Village.

GNCV: The Return Of Deal Or No Deal

It's been a while since we've played Deal or No Deal folks, but unfortunately (and completely expected if you've been paying attention at all) it's time for another major bank to step up to see which suitcase full of cash they'll get from you, the American Taxpayer.

Today's contestant, please welcome...CIT Group!
Troubled US business lender CIT Group is nearing a deal in its talks with federal regulators to obtain a government aid package, The Wall Street Journal reported.

The development came as corporate customers began to draw down on their credit lines Monday and Tuesday to the tune of several hundred million dollars, the Journal said, citing people familiar with the matter.

The cash-strapped company's board, it added, had discussed a number as high as 775 million dollars for the drawdowns.

Under the aid plan, regulators would allow CIT, which operates in more than 50 countries and provides financial services to small and middle market businesses, to transfer assets from its holding company to its bank in Utah.

The Federal Reserve would let CIT pledge some of the assets at its discount window, and the company would move to refinance some of its existing debt, the Journal said, noting the aid package had not been finalized and the possibility of a deal remained uncertain.

US government officials are split over the amount of aid that should be given to CIT and, according to some, CIT is seeking to exaggerate the consequences of its potential collapse, the newspaper said.

"There is also the risk that propping up CIT will reinforce the stigma that Washington will bail out companies that aren't even considered too big to fail," it added. The government saved insurance giant AIG from collapse in September, citing concern it was "too big to fail."

Standard & Poor's has lowered CIT credit ratings to CCC+/C, citing "increased near-term liquidity concerns."

S&P said CIT has more than one billion dollars of unsecured notes maturing in the third and fourth quarters, which could result in payments "that could become increasingly difficult to make."

Ahh...but it's not Hank Paulson asking bank CEOs to pick among the many trillions in those shiny suitcases this time, and George W. Bush calling the shots from the booth above as The Banker. The show's gotten a rewrite, kids!

Now it's Timmy Geithner handling the M.C. duties, stepping up from Hank Paulson's gofer last season...and The Banker? None other than Barack Obama himself (The Obanker?)

So here's the question: will Obama stick to the script and allow Timmy to give away billions to "save" CIT Group, or will he call for a last-minute rewrite? Obanker is in quite a spot. He remembers what happened the last time The Banker was talked into saying "No Deal!"... to a little company called Lehman Brothers. The resulting financial crisis nearly wiped out the playing field and did wipe out trillions upon trillions of dollars in global wealth. At this point it's not a question of if the American economy is badly wounded, but how many years...possibly will take to recover.

If it recovers at all. CIT Group would be the fourth largest bankruptcy in American history if it happened. Obama doesn't have a choice but to save it, right? CIT handles lending for nearly 100,000 retailers, big and small. If they went under, the business lending market would shatter, perhaps becoming a fatal blow the the economy. It's not quite the global systemic risk that Lehman was, but it's still significant...and our economy is in much worse shape than it was when Lehman went under.

Or does he? My argument is that CIT has to die. If it doesn't, it'll just be back several months down the road asking for more money. As a matter of fact, I expect a hell of a lot more contestants for Deal or No Deal to pop up over the next 12-18 months. Obanker's real problem is the rules of the game. At this point, there's no downside towards being a bad faith player. Moral hazard says you'll get bailed out if you only get your tentacles around enough Jenga pieces to bring the entire structure down. Make all the bad deals you want! CIT did, and it represents the third generation of Deal or No Deal players.

Bear Stearns was first (No Deal!), followed by Fannie and Freddie(Deal!). Then came Lehman Bros. opening up the second season of the game, getting a No Deal that spawned the entire industry getting Deals.

Now it's season three. CIT Group is the first contestant. It won't be the last. Will Obanker save it, extending moral hazard, or kill it and send out a warning that a new Banker is in town?

Given the history of the game and this Banker, it's only a matter of how much is in the suitcase.

Be prepared.


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